Bergen Brunswig Shares Soar on Judge’s Remarks
Shares of Orange-based Bergen Brunswig Corp. and AmeriSource Health Corp. surged to all-time highs as comments from a U.S. judge late Friday raised investors’ hopes that he will permit proposed acquisitions of the two drug wholesalers.
Bergen rose $3.63 to close at $55.50, after hitting $62.25, up almost 17% from Friday’s closing price. AmeriSource, which is based in Valley Forge, Pa., climbed $9.25 to $76.75 after reaching $80.75, almost 20% higher than Friday’s close.
The Federal Trade Commission is challenging Cardinal Health Inc.'s $4.5-billion purchase of Bergen and McKesson Corp.'s $3.2-billion acquisition of AmeriSource Health Corp.
As closing arguments in the case ended late Friday, U.S. District Judge Stanley Sporkin sent his strongest signal yet that he’s likely to side with the companies, the four largest U.S. drug wholesalers.
“Certainly, it was a positive day on Friday,” said Adam Feinstein, a Salomon Smith Barney analyst who attended most of the seven-week hearing. “Closing arguments, I think, went very well.”
Still, Feinstein said, “I don’t know how we can be certain how he’s going to rule.”
Shares of Cardinal, based in Dublin, Ohio, rose $2.19 to $96.81. San Francisco-based McKesson fell 31 cents to $79. The “spread” between the AmeriSource trading price and McKesson’s offering price narrowed to $35.43, its lowest closing level since April 28. A small spread indicates investor optimism for completion of an acquisition.
Sporkin has indicated he’ll issue his decision by the end of this week. If he sides with the companies, the FTC could appeal to a three-judge panel of a Washington-based federal appeals court. That process is likely to take several months.
In the meantime, the FTC could seek a temporary stay, which would prevent the companies from combining until the appeal is resolved.
Near the end of arguments Friday, Sporkin said he didn’t share the FTC’s fears that the companies would raise prices and that other companies couldn’t enter the $94 billion drug distribution market.
“I think the facts dictate that these markets are not going up and that all those fears about prices rising are misplaced,” Sporkin told FTC lawyer Richard Parker.
“I have great confidence that things will work out all right. I’m not so sure on a legal aspect. But on a practical aspect, I don’t think you have a concern, and I don’t have any concern.”
Sporkin also said the dispute was one of the most difficult he has encountered in his 13 years as a judge. Still, his comments at the end of the day suggested he wasn’t convinced the combinations would harm competition.