Bergen Signs Cash Deal for Durr-Fillauer : Acquisition: Orange-based drug wholesaler was relentless in pursuing Alabama company, for which it will pay $470 million.

ORANGE — Persistence has paid off for Bergen Brunswig Corp. The Orange-based drug wholesaler said Tuesday that it has signed a definitive agreement to purchase Alabama competitor Durr-Fillauer Medical Inc. for $470 million in cash.

The agreement came two months after Bergen Brunswig launched a takeover attack aimed at Durr-Fillauer. The effort to purchase the Montgomery-based company was spurred by an announcement June 2 that Durr-Fillauer, a longtime target of Bergen Brunswig, had agreed to merge with Cardinal Distribution Inc. of Dublin, Ohio.

Bergen Brunswig countered a month later with a strategy that included haggling, threatening legal action and waging a bidding war that drove the smaller wholesaler’s stock up more than 50%.

Company officials said that, with the exception of several top executives, there will be no immediate layoffs at either Bergen Brunswig or Durr-Fillauer. Durr-Fillauer, at least in the near future, will operate independently, although under the Bergen Brunswig name.

Company officials and analysts say that the combined company will have a solid base in the West and Southeast and likely annual sales of $6 billion. It will be second only to McKesson Corp. of San Francisco, with annual sales of more than $7 billion.

“I think the combination will be very good for Bergen,” said Steven Huffines, an analyst at Sterne, Agee & Leach in Atlanta who has been closely watching Bergen’s pursuit of Durr-Fillauer. “They are getting a fair deal.”

Huffines, like other analysts watching Bergen Brunswig and Cardinal battle for Durr-Fillauer, said the prize eventually went to Bergen Brunswig because it was able to outbid its competition, even though its hostile approach most likely created enemies inside Durr-Fillauer.

“It was a less-than-friendly takeover,” said Donald Spindel, an analyst for the brokerage A.G. Edwards & Sons Inc. in St. Louis. “But that doesn’t mean things can’t be resolved.”

One of the more sensitive issues during the two-month takeover attempt was whether Durr-Fillauer’s four top executives were willing to sign employment agreements containing restrictive no-compete clauses.

Chief Executive W.A (Bill) Williamson, who owns more than 1 million shares in Durr-Fillauer stock, will not remain with the company, said Neil Dimick, a Bergen Brunswig vice president. Durr-Fillauer’s president, Charles E. Adair, will stay, however, Dimick said.

Adair said Tuesday in a telephone interview that he has not signed any employment agreement. He characterized Bergen Brunswig’s pursuit of his company as hostile: “In my opinion, it was.”

Bergen, which offered in early July to buy Durr-Fillauer for $26 a share, later sweetened its bid to $33 a share in its effort to thwart Cardinal’s attempt to merge with Durr-Fillauer, thus expanding into the lucrative Southeast market.

Cardinal never raised its own bid of $30.50 a share. Including assumption of $70 million of Durr Fillauer debt, that deal would have been worth $430 million.

David Bearman, Cardinal’s chief financial officer, said his company was told by Durr-Fillauer officials that the deal was off. Durr Fillauer paid Cardinal $13.5 million to terminate the agreement, Bearman said.

Cardinal, Bearman said, will be seeking other acquisitions in the near future. The company decided not to match or better Bergen’s bid, he said, because it was reluctant to take on unnecessary debt.

Durr-Fillauer, after resisting Bergen Brunswig for two months, agreed to the acquisition late Friday, Dimick said. The two companies announced the all-cash deal Tuesday morning.

Dimick said his company has been negotiating with Continental Bank in Chicago to provide financing for the deal. Bergen Brunswig will likely borrow more than $200 million, he said, to supplement the $300 million in cash it already has to purchase Durr-Fillauer’s 12 million outstanding shares.

“We are working out the terms now,” Dimick said.

Dimick said the deal could close as early as the end of the month if a majority of Durr-Fillauer shareholders sell their shares outright. If not, Dimick said, a stockholder meeting would have to be held before the deal could be finalized.

The deal will also have to be approved by the Alabama, Florida and Louisiana attorneys general, who have been investigating the potential for antitrust violations, Dimick said.

Also, Bergen Brunswig must receive assurance from Durr-Fillauer that the Alabama firm’s top customers will continue to do business with the merged company. SunHealth Enterprises Inc. of Raleigh, N.C., Durr-Fillauer’s biggest customer, has already indicated a willingness to stay, officials said.

Analysts said the battle was worthwhile for Bergen Brunswig because Durr-Fillauer is probably the last major acquisition that will come along for several years.

“There are very few dominant players left in the drug wholesale business,” Spindel of A.G. Edwards said. “Durr-Fillauer is one of the last plums left.”

Analysts also said that, although Bergen Brunswig might sell off Durr-Fillauer’s surgical supplies division to pay for the takeover, it is unlikely to do so, at least for the short term. Cardinal, in its merger agreement, had said that it would spin off that unit while keeping the more lucrative drug wholesale division.

Durr-Fillauer’s drug business accounts for 70% of its total annual revenue of about $700 million. Analysts said Bergen Brunswig will probably hold on to the surgical supplies division to see how lucrative it is.

But Don Hultgren, an analyst for the brokerage Raymond, James & Associates Inc. in St. Petersburg, Fla., noted that Bergen Brunswig in the past sold off its own surgical supplies division. “It was a business they abandoned before,” Hultgren said. “They chose not to pursue that.”

Bergen Brunswig’s Dimick said that his company’s intent is to “focus on the pharmaceutical business, which is the largest part” of Durr-Fillauer. “It’s a fair statement to say that we are evaluating what we do with that business.”

Bergen Brunswig’s stock, traded on the American Stock Exchange, lost 25 cents a share Tuesday to close at $18.75.

Durr-Fillauer, traded on the NASDAQ market, gained 37 cents to close at $32.87. Cardinal Distribution, also traded on NASDAQ, gained 25 cents to close at $28.75.

At a Glance: Durr-Fillauer Medical Inc.

* Corporate headquarters: Montgomery, Ala.

* Corporate officers: W.A. (Bill) Williamson, chief executive; Charles E. Adair, president Nature of business: Distributor of pharmaceuticals, sundries and medical products to hospitals, pharmacies, nursing homes, physician offices, laboratories and veterinary clinics.

* History:

June 2 -- Durr-Fillauer agrees to sell its drug-distribution business to Cardinal Distribution Inc. and spin off its medical supplies business to its own stockholders. The deal is valued at $166.5 million to $181.5 million.

July 7 -- Bergen Brunswig offers to buy Durr-Fillauer in a deal that could be worth $365 million.

July 17 -- Durr-Fillauer and Cardinal Distribution sign a stock-swap agreement valued at $450 million. Bergen Brunswig executives send a letter to Durr-Fillauer, warning it not to sign any pact without considering Bergen’s offer and ask a judge to block the Cardinal deal.

Aug. 18 -- Bergen Brunswig raises its offer to $396 million in cash.Aug. 25 -- Bergen sweetens its offer to $466 million on the condition that Durr-Fillauer’s top executives agree not to take jobs with any competitor for at least two years; two days later, Durr-Fillauer’s board rejects the offer, saying the employment agreement is too restrictive.

Sept. 8 -- Durr-Fillauer agrees to be purchased by Bergen Brunswig for $470 million in cash after the Orange-based company drops its “no-compete” clause.

* Employees: 1,300

* 1991 sales: $950.5 million

Source: Los Angeles Times Orange County Editorial Library