Intergroup Holders OK Bergen Merger
A prolonged battle against the merger of two unlikely corporate partners ran out of steam Thursday when National Intergroup Inc. declared that its shareholders had approved by a “clear majority” a linkup with Bergen Brunswig Corp. of Los Angeles.
The vote all but clears the way for Pittsburgh-based National, formerly National Steel Corp., and fast-growing Bergen to close the merger next month. The deal will create a holding company, Bergen National Corp., embracing the two existing firms and controlled by Bergen.
Architects of the merger contend that the deal will strengthen National by reducing its dependence on the troubled steel business and giving it a piece of the fast-growing drug-distribution business--a virtue that National underscored Thursday by declaring that it will “probably” lose money in the current quarter, in contrast with Bergen’s recent surge in profits.
Sold Half of Steel Unit
National has already sold half its steel unit to a Japanese firm, Nippon Kokan KK, and acquired 82% of what is now First Nationwide Financial Corp., the San Francisco-based parent of First Nationwide Savings.
Bergen, eager to exploit further the explosion in the health-care industry, would use National’s $300 million in proceeds from the steel sale to expand. It would also use the Pittsburgh firm’s $300 million in tax credits to shelter its considerable profits. Bergen distributes drugs, medical and surgical supplies and videocassettes.
National Chairman Howard M. Love and Bergen Chairman Emil P. Martini Jr. said Thursday that the new company would probably make a major acquisition in the health-care field this year.
Shareholders of Bergen had easily approved the merger Monday in Los Angeles. But in National’s camp, a proxy fight was being waged by Leucadia National Corp., holder of 7% of the stock in the steel and financial-services firm.
The voting wasn’t over until the end of Thursday’s special shareholder meeting here, and final results won’t be tabulated for a few days. But about two-thirds of the outstanding shares had been voted in advance, and top Leucadia executives were overheard congratulating Love before the meeting began. Love wouldn’t estimate the final results but said the margin would “not be an eke or a squeak.”
Leucadia officials would only say that about 8,000 of National’s 22,000 shareholders supported them. It wasn’t known how many shares those holders owned.
Asked if he were concerned that Leucadia might cause further problems with its continued holdings, Martini said: “I don’t believe so. It’s certainly not a concern of mine.”
Because of National’s ownership of First Nationwide Savings, permission for the merger is needed from the Federal Home Loan Bank Board, which regulates most thrifts. The board is not expected to oppose the deal.
Supported by 2 Others
Leucadia was supported by two other institutional investors managing about 20% of National’s shares. They argued that the market-value swap of 1.225 Bergen shares for each share of National would shortchange National shareholders in comparison to what an outright sale or liquidation would bring.
The stock to be received by National shareholders is currently valued at about $32 a share, more than the $30.75 at which National’s shares closed Thursday, down 25 cents. (Bergen Brunswig’s shares closed at $25.50, down 37.5 cents.) Though some analysts were skeptical and National executives scoffed at the idea, Leucadia claimed that shareholders could realize close to the book value of $44 a share.
“We’ve attempted one thing and one thing only: a better deal for shareholders,” Joseph S. Steinberg, president of Leucadia, told shareholders Thursday.
After the meeting, Ian M. Cummings, chairman of the New York-based finance firm, said of Leucadia’s failure to rally more support: “There are a lot of people who just vote with management. Others might have thought they’d be better off with Bergen’s management” than with National’s.
There might also have been doubts that Leucadia, or any other firm, could overcome the obstacles to a takeover of National. In the event of a takeover, Nippon Kokan has an option to force the new owner to buy back half of the steel unit at a premium--a dubious prize.
The opposition aside, Love has won plaudits for his successful efforts to remake the old-line steel company into an entity that can survive in an industry that is being left behind during the recovery. Other than U.S. Steel Corp., National was the only U.S. steel-based firm to turn a profit last year. Love hasn’t ruled out an ultimate sale of the steel unit, but that can’t be done for five years.
“It is now one of the best-situated of the American steel companies,” analyst Peter Marcus of Paine Webber said Thursday.
Gives Up Ultimate Control
In the process, Love gives up ultimate control of the company. Bergen interests control the votes of 11 of the 21 board members in the new firm.
But the two sides went to great lengths to avoid putting either side directly in charge. Love is to run the National Intergroup subsidiary, and Martini will run the Bergen Brunswig subsidiary. Love will be chairman of the holding company and Martini will be president, but there will be no chief executive. Each man will earn $400,000 a year, and major decisions will require a two-thirds vote of the board.
Martini said the new parent firm and the existing Bergen Brunswig headquarters staff will move in April into an office building under construction in Orange, Calif. Martini and Love said there will be no layoffs as a result of the merger.
Though he will be chairman of the new Bergen National, Love, a Pittsburgh native, said he will run the National Intergroup unit from his home base.
“I ain’t movin’ to L.A., that’s for sure,” he said.
