Directors OK Plan to Transfer Bergen Brunswig Control

The directors of Bergen Brunswig Corp. on Wednesday approved a stock restructuring program that will transfer control of the Orange-based health products distributor from the founding Martini family to other shareholders.

The plan was proposed by brothers Emil and Robert Martini, who are approaching retirement age, and has been under negotiation since April. It must be approved by company shareholders.

The brothers’ late father, Emil P. Martini Sr., co-founded the Bergen Drug Co. in 1947. In 1969, the firm merged with Brunswig Drug Co. and changed its name to Bergen Brunswig.

Emil P. Martini Jr. is the the company’s 60-year-old chairman and chief executive officer. Robert E. Martini, 56, is president and chief operating officer. Together, the Martini brothers own more than 97% of the company’s Class B stock, which has the power to elect a majority of the company’s directors.

Under the new plan, the Class B stock owned by each brother would be converted to Class A stock in five years or upon his death, if that comes sooner. After all the shares are converted, holders of the Class A stock would elect the entire board of directors.

The conversion would eliminate Bergen Brunswig’s two-class stock structure and make the company a “one-share-one-vote” corporation, said chief financial officer George E. Reinhardt Jr.

“The plan provides for an orderly transition from the existing senior management to new management,” Reinhardt said.

However, Reinhardt said that the Martinis have not yet set retirement dates, and no successors have been chosen.

The conversion plan offers the Martini brothers the advantage of being able to sell their shares on the American Stock Exchange, where the Class A stock is traded. Their Class B stock is not traded on any exchange.

During the five-year transition, Reinhardt said, the Martinis and other holders of the Class B shares would receive an additional 3.3 million shares of newly issued Class A stock.

Eliminating Bergen Brunswig’s two-tiered stock structure, which was designed to keep control of the company in the hands of its founders, will eliminate a safeguard against unwanted takeovers.

“At the end of five years, there would be no way to prevent or stop a takeover,” Reinhardt said.

Bergen Brunswig shareholders will vote on the restructuring proposal at the company’s annual meeting on Dec. 1.

With more than $3 billion in annual sales, Bergen Bruswig is one of Orange County’s largest publicly held corporations. Most of its sales are generated by the company’s wholesale drug business, which has captured about 16% of the national market. The company is also the nation’s largest distributor of videotaped movies.