Settlement Paves Way for Syncor Takeover
Syncor International Corp. said Wednesday that its founder would foot the bill for $2.5 million in federal fines and resign from the board of the Woodland Hills nuclear pharmacy company, settling an overseas bribery scandal and allowing Syncor’s takeover by Cardinal Health Inc. to proceed.
The companies said Cardinal Health, an Ohio-based drug distributor, cut its all-stock offer by 9.6%, knocking the price tag on the deal to less than $800 million, not including assumed debt.
The moves follow the discovery last month by Cardinal Health of improper Syncor payments in several countries, including $500,000 that founder Monty Fu and his brother, Moses Fu, paid to customers in Taiwan.
Syncor Taiwan Inc. will plead guilty to one count of violating the Foreign Corrupt Practices Act, the companies said. Monty Fu, who quit as chairman when news of the improper payments broke Nov. 6, will give up any role in Syncor and forfeit $2.1 million in severance pay. He also will hand over enough Syncor stock to cover a $2-million fine by the Justice Department and a $500,000 penalty imposed by the Securities and Exchange Commission, Syncor said.
“It’s a positive outcome for everyone but Monty Fu,” said analyst Andrew L. Speller of A.G. Edwards & Co.
Cardinal intends to merge its own smaller nuclear medicine unit with Syncor to create a subsidiary, Nuclear Pharmacy Services. In so doing, Cardinal would become by far the nation’s largest provider of radioactive substances to diagnose and treat diseases, a business it described as “fast-growing and profitable.”
Cardinal’s original offer of 0.52 of its shares for every share of Syncor was worth about $870 million when it was announced in July. It now plans to pay 0.47 of its shares for every Syncor share -- a deal worth $789 million at Wednesday’s closing price and one that analysts characterized as good news for both companies and their stockholders. Cardinal also would assume $202 million in Syncor debt.
“Under the circumstances, I would not define [the revised deal] to be a substantial discount. It could have been a lot worse,” said Lawrence C. Marsh, who follows the companies for Lehman Bros. Marsh and Lehman have had no financial interest in the companies, though Lehman said it expected to do some banking for them in the future.
Syncor, whose stock value was cut in half by the bribery allegations, rose by $3.68 a share, or 14.1%, to $29.80 on Nasdaq. Cardinal climbed $1.75, or 2.8%, to $64 on the New York Stock Exchange.
Fu was straight out of pharmacy school in the 1970s when he founded Syncor’s predecessor company. He became something of a father figure to the nuclear pharmacy industry, building a network of 130 facilities that provide short-lived radioactive medicines to hospitals and clinics.
According to a recent proxy filing with the SEC, Fu is the largest individual owner of Syncor stock, holding 1.45 million shares valued at about $43.5 million under the terms of the Cardinal Health transaction.
He couldn’t be reached Wednesday for comment.
Cardinal, known for making scores of acquisitions, put its takeover of Syncor on hold last month, expressing worries about its reputation.
It said it is now “satisfied that it can move forward with the acquisition in a manner that is consistent with its high standards.”
Syncor’s filings with the SEC describe a two-year courtship with Cardinal, which broke off at one point in 2001 in part because Cardinal wasn’t interested in purchasing Syncor’s secondary operation, a chain of centers that provide X-rays, CT scans and other internal imaging services to patients.
Those facilities, along with Syncor’s overseas operations, are being sold or closed.
