The $60-million merger agreement between Syncor International and Albuquerque-based Nuclear Pharmacy will probably lead to the relocation or layoff of most of Syncor's 50 employees at its headquarters in Sylmar, company officials say.
An undetermined number of additional cutbacks are expected to be made at the five service centers operated by Syncor and Nuclear Pharmacy in Southern California. The companies, which recently have suffered from slim profits or losses, operate the nation's two largest networks of "nuclear pharmacies," which prepare radioactive pharmaceuticals for use in clinics and hospitals.
Terms of the merger plan, which was signed on May 17, call for the combined company to have its headquarters at Nuclear Pharmacy's existing home office in Albuquerque.
Name Not Yet Chosen
The merger, which requires approval from federal and state authorities, is expected to be completed in 30 to 45 days. No name has been chosen for the new company.
William Garland, a stockbroker with First Affiliated Securities in Encino who is familiar with Syncor's operations, predicted that the headquarters consolidation and service center cutbacks will help the companies reduce costs and regain their financial footing.
William A. Kemmel Jr., a Syncor vice president, said company officials expect to maintain a small office in the Sylmar area. Kemmel said, however, that most of the 50 headquarters employees are likely to relocate to Albuquerque or leave the company.
Competing Service Centers
Syncor and Nuclear Pharmacy each employ about 675 people nationally. Southern California is one of the few markets where the companies have operated competing service centers.
Kemmel said Syncor has between 10 and 12 employees at service centers in both Torrance and Glendale. Nuclear Pharmacy employs about 20 people at a service center in Van Nuys and 10 at each of its centers in San Diego and Anaheim.
The companies have not decided which of the service centers in Southern California will have their staffs cut or eliminated, Kemmel said.
Paves Way for Departure
The merger agreement paved the way for the departure of Syncor's president, Mark T. Hebner. Under the agreement, Syncor repurchased Hebner's 11% stake in the company for $4.90 a share, or about $5 million. Hebner, who helped found Syncor in 1974, will serve the merged business as a consultant for five years.
Kemmel said the location of the headquarters was an important issue to Nuclear Pharmacy in what he called the companies' plan for "a merger of equals," with each company valued at about $30 million. For the most part, the merger agreement was crafted to ensure that neither Syncor nor Nuclear Pharmacy's management would emerge as dominant in the new company.
For example, the current top executive of each company will share the title of co-chief executive at the merged business. Monty Fu, currently Syncor's chairman, will be the merged company's chairman and co-chief executive. Robert Sanchez, who now is Nuclear Pharmacy's president, will be president and co-chief executive of the new business.
Syncor and Nuclear Pharmacy also have begun sharing the same eight-member board of directors, with four directors representing each company.
After the merger, Syncor's two biggest shareholder groups will emerge as the biggest shareholders in the new company. Garland said Fu and his family and a French corporation, Compagnie ORIS Industrie, will each hold stakes of 10% to 15% in the merged business.
Roughly Equal Stakes
The merger is to be a stock transaction, with Syncor shareholders receiving 0.729 of a share of Nuclear Pharmacy's stock in exchange for each of their Syncor shares. Kemmel said that would give current shareholders of each company approximately equal stakes in the combined company.
Kemmel said the companies will fit together well because their businesses are similar but generally located in different parts of the country. Syncor's service centers are concentrated in the Northeast and Midwest while Nuclear Pharmacy's tend to be in the South and Southwest.
Both companies have suffered financial setbacks recently. Nuclear Pharmacy lost money during its last fiscal year and earned only $138,755 on revenue of $32 million during the first nine months of its current fiscal year.
Last week Syncor reported its second consecutive unprofitable quarter. The company said that for the quarter ended March 31, Syncor's second quarter, it lost $259,549 on revenue of $10 million. During the same quarter last year, Syncor earned $265,677 on revenue of $9.3 million.
The company blamed its loss partly on the costs of a reorganization and an unsuccessful marketing agreement it entered into two years ago with Compagnie ORIS Industrie, a subsidiary of the Atomic Energy Commission of France. Earlier this month, Syncor severed most of its ties with the French company.
Syncor and Nuclear Pharmacy draw most of their sales from preparing what are known as radio-pharmaceuticals. These are radioactive substances that are ingested or injected into patients to enable medical equipment at hospitals and clinics to scan the patients' internal organs.
SYNCOR INTERNATIONAL AT A GLANCE Syncor International operates a network of 37 service centers in 15 states that prepare radioactive pharmaceuticals for hosdpitals and clinics. It has 675 employees, including 50 at its headquarters in Sylmar.