Cardinal Health Looks To Buy BWI

DUBLIN, Ohio--Cardinal Health Inc. is seeking to buy Bindley Western Industries for about $1.7 billion, its first attempt at acquiring another wholesale drug distributor since the federal government blocked an effort in 1998.

If successful, the deal would expand Cardinal Health's pharmaceutical distribution sales to the federal government and add a new service for the company, nuclear medicine. Bindley Western operates nuclear pharmacies that prepare pharmaceuticals using radioactive materials.

Cardinal Health officials believe its proposed acqusition of Indianapolis-based Bindley Western, the nation's fifth largest drug distributor, will be approved by the Federal Trade Commission.

Two years ago a federal judge blocked No. 2 Cardinal Health from buying No. 3 Bergen Brunswig for $2.6 billion. At the same time, the judge stopped No. 1 wholesaler McKesson HBOC Inc. from buying No. 4 AmeriSource Health Corp.

The FTC asked for the ruling, arguing that the mergers would reduce competition and raise prices.

"We're confident that this is a different transaction than we talked about before with Bergen," Robert Walter, Cardinal Health's chairman and chief executive, told analysts on a conference call Monday. "Bindley is significantly smaller."

FTC spokesman Mitch Katz said Monday it is too soon to say how the FTC would react to the merger.

Analysts, however, believe the merger will go through. "We don't expect any antitrust issues," said Leonard Yaffe of Banc of America Securities.

He said the merger would make Cardinal Health the No. 1 drug distributor with 26 percent of the market to 23 percent for McKesson. The mergers from two years ago would have given Cardinal Health and McKesson a much larger market share,

70 percent.

Nonetheless, analyst Ray Lewis of McDonald Investments said he would not be surprised if the FTC takes a good look at the merger.

"If there's another move by someone else in the industry, it's likely to get far more scrutiny," he said.

Bindley Western shareholders would receive 0.4275 shares of Cardinal Health stock for each share of Bindley Western stock they own. Cardinal Health also will assume debt that averaged $430 million for the year that ended Sept. 30.

The merger is expected to close by June 30.

Bindley Western serves independent and retail chain pharmacies, hospitals, clinics and HMOs from 16 distribution facilities operating in 14 states. The company had sales of $5.8 billion for the year that ended June 30 and profits of $42 million.

Cardinal Health, based in this Columbus suburb, had revenue of $25.2 billion for the year ended June 30 and profits of $730 million. It has branched into other services in recent years that support the health care industry.

William Bindley, 60, Bindley Western's founder, chairman, chief executive and president, will join Cardinal Health's board of directors.

Shares of Cardinal Health fell $4.94 to $94.56 on the New York Stock Exchange, where shares of Bindley Western rose $5.88 to $38.88.

Source:The Associated Press