Bergen’s New Bid for Durr-Fillauer Is Rejected : Takeover offer: The Alabama-based drug wholesaler says the $466-million proposal is too restrictive with terms of employment for its top four executives.
Durr-Fillauer Medical Inc. said Thursday that it has rejected a $466-million takeover bid by Bergen Brunswig Corp., saying that employment agreements proposed for Durr-Fillauer’s four top executives were too restrictive.
Bergen Brunswig had submitted the employment agreements, which included standard “no-compete clauses,” to Durr-Fillauer’s directors Tuesday as part of its sweetened offer to acquire the Alabama-based drug wholesaler.
No-compete clauses usually ban an ex-company official from working for a competitor for a specified period of time. The four Durr-Fillauer executives, including Chief Executive W.A. (Bill) Williamson, said in a press release Thursday that they would be willing to sign no-compete clauses for a period covering up to two years.
No-compete clauses proposed by Bergen Brunswig, Durr-Fillauer officials said, were for much longer periods of time.
Bergen Brunswig had also asked Durr-Fillauer for assurances that its two top customers--Sun Health Enterprises Inc. in Raleigh, N.C., and Volunteer Hospitals of America Inc. in Dallas--would remain with the new combined company.
Durr-Fillauer officials reacted indifferently to the two conditions, handed over to the board a week after Bergen Brunswig raised its offer to $33 a share from its initial bid of $26 a share. They promised on Tuesday, nevertheless, to consider the proposal.
But after negotiations Wednesday with Bergen Brunswig officials, the 12-member Durr-Fillauer board voted not to accept the offer, although it said the all-cash bid was “fair from a financial point of view,” Durr-Fillauer spokeswoman Jennifer Wall said.
“You have to consider those other things,” she said. “There are problems with those conditions. They came to an impasse rather quickly.”
Williamson and Durr-Fillauer President Charles Adair, who is also one of the four executives considering an employment agreement, are both on the board of directors.
Neil Dimick, a Bergen Brunswig vice president, said the company would not comment Thursday on the latest twist in its so-far-unsuccessful attempt to take over Durr-Fillauer. He said the company will issue a formal statement today. He would not elaborate.
Bergen Brunswig, based in Orange, is the second-largest drug wholesaler in the United States. It has been trying since early July to buy Durr-Fillauer as a way to expand into the lucrative Southeast market.
Its aggressiveness in seeking to acquire the smaller drug wholesaler has pitted it against another competitor, Cardinal Distribution Inc. in Dublin, Ohio, which is offering $30.50 a share for Durr-Fillauer.
The unfolding events have been like a soap opera. The tale began on July 1 when Cardinal and Durr-Fillauer agreed to merge. Less than a week later, Bergen Brunswig stepped in, announcing that it would buy Durr-Fillauer at $26 a share.
When Durr-Fillauer refused to consider its offer, Bergen Brunswig went to court, asking a judge in Delaware, where Durr-Fillauer is incorporated, to order the Cardinal agreement suspended until the second bid could be considered and put to a vote by Durr-Fillauer shareholders.
When the judge refused to do so, Bergen Brunswig asked that Delaware court documents detailing the Cardinal proposal be shared with Bergen Brunswig.
The judge ruled against that legal maneuver, too, although Durr-Fillauer eventually gave the documents to Bergen Brunswig voluntarily.
In the meantime, attorneys general in Alabama, Louisiana and Florida asked that all documents relating to the escalating bidding war be turned over to authorities because of possible antitrust violations. Durr-Fillauer’s market base is in those three states.
The bidding war drove Durr-Fillauer’s share price higher than what was being offered by either Bergen Brunswig or Cardinal.
Durr-Fillauer’s response to Bergen Brunswig Thursday, however, pushed down the price of the stock, which closed at $32.38 a share, down 75 cents, on the NASDAQ market. Bergen Brunswig, traded on the American Stock Exchange, gained 25 cents to close at $19 a share.
Cardinal’s stock, also traded on the NASDAQ market, closed at $27 a share, down 50 cents.
Durr-Fillauer’s Wall said that, pending any further changes in conditions that Bergen Brunswig included in its latest offer, the Cardinal merger is likely to proceed.
At Cardinal, Chief Financial Officer David Bearman said Thursday that the company hopes to schedule a shareholders’ vote by Sept. 15 and to close the deal shortly afterward.
“We remain ready to proceed,” Bearman said. “We have an agreement. It’s a definitive agreement. We’re looking to complete this as expeditiously as possible.”
