AmeriSource Corp.'s proposed $2.4 billion
combination with Bergen Brunswig Corp. may not run into the same
regulatory roadblocks that ultimately derailed the last serious
attempt of consolidation among drug distribution companies,
analysts said Monday.
The agreement, approved by both boards of directors over the
weekend and announced Monday, will create a company with nearly $35
billion in annual revenue, delivering pharmaceuticals and supplies
to businesses such as drug stores, hospitals and health-maintenance
The new company would rival McKesson HBOC and Cardinal Health
Inc., which last month acquired Bindley Western Industries Inc. to
form the biggest drug wholesaler.
"This transaction does not reduce competition nor does it
violate antitrust laws," said R. David Yost, chief executive
officer of AmeriSource.
The FTC in 1998 blocked Cardinal's proposed purchase of Bergen
and McKesson's planned takeover of AmeriSource. The FTC argued the
deals would put too much power in the hands of McKesson and
Using 2000 revenues as a guide, the combined entity of
AmeriSource-Bergen would be so close to McKesson and Cardinal that
it is unclear which company would be the largest, said Ray Lewis,
an analyst with McDonald Investments Inc. That could bode well for
"Part of the concern (in 1998) was that you were going to get
down to two very major players Cardinal and McKesson with the
third, Binley, a big step down in size," Lewis said. "Now, you've
got three who are going to be pretty close in size and that may
provide a little more comfort from the FTC's perspective."
The Valley Forge-based AmeriSource will own about 51 percent of
the combined entity. It will also assume $1.3 billion in debt as
part of the deal.
Bergen shareholders will receive 0.37 of a share for each share
of the Orange, Calif.-based company they own.
Shares of Bergen Brunswig rose 75 cents to $16.01 on the New
York Stock Exchange, while shares of AmeriSource fell $2.91 to
The combination is expected to create $125 million in annual
cost savings by the third year, partly through layoffs and closing
about half of the companies' combined 52 distribution centers,
AmeriSource president Kurt J. Hilzinger said. Officials declined to
estimate how many people could lose their jobs.
"Make no mistake we are prepared to make the tough decisions
to successfully execute this transaction," said Robert E. Martini,
chairman and chief executive officer of Bergen Brunswig, who will
become chairman of the new company. "This combination is not about
being big, it is about being the best. We will take the best from
Bergen, with about $23 billion in revenue, is about twice the
size of AmeriSource.