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Bergen Brunswig Merger Approved

Pharmaceuticals: FTC backs AmeriSource Health's acquisition of Orange drug seller.

August 25, 2001|JAMES ROWLEY | BLOOMBERG NEWS

AmeriSource Health Corp.'s $4.1-billion purchase of rival Bergen Brunswig Corp., to form the largest U.S. drug wholesaler, was cleared Friday by U.S. antitrust enforcers, who said the combination probably will lead to lower prices.

The combination of No. 3 Bergen Brunswig, based in Orange, with No. 4 AmeriSource, based in Valley Forge, Pa., will be called AmeriSource-Bergen Corp.

The Federal Trade Commission voted 5-0 not to challenge the acquisition. Three years ago, it went to court to block plans to fold the drug wholesale industry's top four companies into two.

Friday's decision signaled that the commission's new 3-2 Republican majority will give more weight to claims that mergers produce price-cutting efficiencies that counteract any harm to competition.

In 1998, the FTC, then under Democratic control, successfully challenged No. 1 Cardinal Health Inc.'s proposed acquisition of Bergen Brunswig as well as No. 2 McKesson HBOC Inc.'s planned buyout of AmeriSource. At the time, the FTC said it would have challenged either takeover on its own.

"The investigation revealed several significant differences between this merger and the transactions that the commission challenged in 1998," the FTC said Friday in an unsigned statement. The transaction would result in "a presumably stronger" company that will better compete with Cardinal and McKesson, four commissioners said.

The FTC's new Republican chairman, Timothy J. Muris, and three other commissioners said the merger would produce efficiencies that "will give the merged company sufficient scale so that it can become cost-competitive with the two leading firms." The unsigned statement was issued on behalf of Muris, Republicans Orson Swindle and Thomas B. Leary and Democrat Sheila Anthony.

In a separate opinion, Democrat Mozelle Thompson rejected that view, though he agreed there was insufficient evidence to challenge the merger in court.

Thompson rejected his colleagues' conclusion that the merger would create efficiencies that would lead to lower prices. "Experience shows that such transactions occur infrequently and, based on the evidence in this case, I doubt that this merger will emerge as one of those rare white tigers," he wrote.

Bergen Brunswig stock, which has risen 42% since the merger was announced five months ago, rose 45 cents Friday to close at $22.65 a share, before the FTC released its decision. AmeriSource stock, which has risen 38% in the same period, increased $1.19 to close $62.19 a share.

The new AmeriSource-Bergen Corp. will have about $35 billion in annual sales and a market share estimated at 30%. The combined company will edge out industry leader Cardinal Health, which completed a $2.2-billion acquisition of rival Bindley Western Industries Inc. in February.

Shareholders of the two companies will meet next week to vote on the merger.

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