Bergen Brunswig Stock Off 16% on Court Ruling
Bergen Brunswig Corp. and AmeriSource Health Corp. shares plunged Monday in the wake of a judge’s move on Friday to block their acquisitions by two of the largest U.S. drug wholesalers.
Bergen’s stock fell $8.33 a share, or 16%, to $44.88 after being off as much as $11 a share earlier in the session. AmeriSource shares declined 26%, falling $20.13 to $56.
U.S. District Judge Stanley Sporkin blocked Cardinal Health Inc.’s purchase of Orange-based Bergen and McKesson Corp.’s acquisition of AmeriSource, saying the transactions would likely hurt competition in the $94-billion-a-year U.S. drug distribution industry. The Federal Trade Commission had filed suit seeking to block the deals.
The ruling is likely to scuttle the merger plans, which were to fold the four biggest drug wholesalers into two companies through transactions valued at almost $8 billion. That would dash the companies’ plans to save hundreds of millions of dollars and boost profits by combining operations, closing duplicate factories and increasing their negotiating power with drug makers.
“As an investor, I’m disappointed,” said John Schroer, an Invesco Funds Group Inc. fund manager whose $2-billion portfolio holds AmeriSource, Bergen and McKesson. “We were hoping for a positive result.”
Throughout the trial, the companies pointed to declining industry profit margins as evidence they’re being squeezed between powerful drug makers and purchasers such as pharmacies and hospitals. They said the consolidation would let them respond to that pressure by becoming more efficient.
Analysts said AmeriSource and Bergen face the steepest road after the failed transactions. AmeriSource recently lost some of its business when No. 1 McKesson signed contracts with chain pharmacies Rite Aid Corp. and CVS Corp. McKesson and Cardinal are more insulated from the failure of the transactions, analysts said, since they’re in a strong position in their main drug distribution business and are also expanding into more profitable areas.
McKesson’s stock climbed $2.25 a share to $82.88, while Cardinal’s shares dipped 6 cents to $96.
AmeriSource and Bergen aren’t likely to flounder for too long, though, because both stand to benefit along with their bigger rivals on soaring sales of pharmaceuticals, investors and analysts said.
“This is not a strong blow to the industry,” said Chris McFadden, an analyst with Wheat First Union. “Those management teams and those companies should continue to perform well for investors.”
