Cardinal To Swallow Pill Co Scherer

Cardinal Health, the nations second-largest drug distributor, is swallowing R P Scherer Corporation, the worlds largest soft gelatin capsules maker, in the latest consolidation of the health-care industry.

The $2.1 billion merger announced on Monday would give Cardinal Health greater control over prescription drugs sold nationwide, making it a supplier for drug wholesalers and not just a middleman.

We compete against self-distribution by manufacturers day in and day out, said Cardinal Health spokeswoman Debra Hadley.

Large chains and other power buyers can negotiate with manufacturers and bypass wholesalers, so we have to be an extremely efficient alternative, she added. The companies generated a combined $12.8 billion in revenue in the last 12 months, Hadley said.

Scherer, based in Troy, Michigan, is developing a faster-acting delivery form for Viagra, Pfizers hot-selling impotence drug. Shareholders and the federal trade commission must approve the merger, which is expected to be completed this summer.

In an unrelated deal, the FTC is trying to block Cardinals merger with Bergen Brunswig, the nations third-largest drug distributor.

The FTC is also trying to stop the combining of San Francisco-based Mckesson Corp., the nations No 1 drug distributor, with No 4 Amerisource Health of Malvern, Pennsyl-vania.

The FTC will ask for a court order to temporarily bar the mergers at a June 10 hearing in US district court in Washington D C, said spokeswoman Claudia Bourne Farrell.

The commission said in March that if the mergers were allowed to proceed, the two new entities would control about 80 per cent of the $80 billion drug industry and could drive up prices of prescription drugs sold through wholesalers 1 per cent, or $800 million.

The FTC analysis ignores the enormous efficiencies this would generate and the huge cost savings that would be passed on to customers, Hadley said.

Cardinal would use a combination of stock and debt to buy Scherer, which operates 19 facilities in 12 countries. Scherer shareholders would receive a fixed rate of .95 shares of Cardinal common stock for each share of Scherer common stock.

Cardinals stock was down $5.75 a share, or about 6 per cent, to $90 in trading Monday on the New York Stock Exchange. Cardinal will issue about 23 million shares in the merger and is expected to assume about $159 million in long-term debt.