Firms Campaign to Persuade Stockholders : Bergen, National Intergroup Press for Merger
Tired of hearing what a bad idea their merger is, Bergen Brunswig Corp. and National Intergroup Inc. began a cross-country campaign Thursday to convince their respective shareholders that the two companies are a good match.
The merger of Los Angeles-based Bergen, a big drug distributor, and National Intergroup, a financial-services and steelmaking concern headquartered here, has received mixed reviews from analysts and shareholders. Some have perceived the partners as an odd couple, and Leucadia National Corp., a New York financial-services firm with a 7% stake in National Intergroup, has launched a proxy fight to block the merger.
While insisting that the extent of the opposition has been exaggerated, executives of the two firms kicked off a two-week blitz of Los Angeles, San Francisco, New York, Boston, Chicago and other cities by conducting a telephonic transcontinental news conference to explain the complexities of their long-delayed proxy and prospectus outlining the merger.
“It’s an incredible opportunity,” said Howard M. Love, chairman and chief executive of National Intergroup, which owns National Steel Corp. and San Francisco-based First Nationwide Financial Corp.
The two companies are selling the merger as the blending of National Intergroup, a cash-rich firm that must diversify to reduce its dependence on steel, with Bergen, a highly automated, fast-growing firm that needs cash to further exploit the burgeoning drug and health-care product distribution business.
Narrowing Gap
Most of the grumbling has come from Leucadia and Baltimore-based T. Rowe Price Associates, another big National Intergroup shareholder, who say the terms of the merger--a market-value swap of 1.225 shares of Bergen common shares for each share of National common--would bring them less than a liquidation or outright sale of the company.
That alleged gap has been narrowing recently. Trading at $28 per share when the merger plan was announced last October, National Intergroup common stock has flirted with $32 per share this week on the New York Stock Exchange. And Love ridicules suggestions that a sale or liquidation would bring $35 to $45 a share.
The two companies produced theoretical income statements showing that a merged company would have earned $2.69 per share over comparable, recent 12-month periods instead of the $1.86 actually earned at Bergen and $2.26 at National.
Some bullish analysts have estimated that National Intergroup’s earnings could rise to $4 or $5 per share this year if the merger goes through, as opposed to about $2 without Bergen.
Meanwhile, the proxy disclosed that National’s First Nationwide Financial subsidiary was notified in late January of “possible overpayments” of scheduled reimbursements by the Federal Savings and Loan Insurance Corp. The federal agency has paid $359 million since 1981 to First Nationwide, in connection with its First Nationwide Savings unit’s conversion into a federally chartered savings and loan association.
Votes Scheduled
Company officials said no dollar amounts have been mentioned, and they insisted that they will “resist vigorously” any attempt by the government agency to change an agreed-upon formula for reimbursements.
Bergen shareholders are to meet March 4 in Los Angeles to vote on the merger. National Intergroup shareholders are to meet three days later in Pittsburgh.
One oddity of the merger, as detailed in the proxy and prospectus, is the lengths to which the two companies have gone to avoid putting either one in charge of the merged firm, even though Bergen would have ultimate control because of its power to elect 11 of 20 directors. The new entity, Bergen National Corp., would be a holding company for the two existing firms, which would be subsidiaries.
Love would be chairman and Emil P. Martini Jr., chairman of Bergen, would be president; there would be no chief executive. Each would run his respective subsidiary, and each would earn $400,000 a year. Similar match-ups would be maintained through the second management tier of the holding company.
Love and Martini would even alternate chairmanship of the executive committee each year. And major decisions, including the firing of top executives, would require two-thirds votes of the board, ostensibly overcoming the 11-10 edge held by the Bergen faction.
It is an elaborate effort to make everyone appear equal when they are not. That is suggested in the proxy when National Intergroup’s support of the merger is explained as an opportunity to get into the distribution business, “even though it represented a significant loss of management control by National management.”
