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Cardinal, Scherer to merge
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May 18, 1998: 11:26 a.m. ET
Capsule maker R.P. Scherer to be unit of Cardinal Health in $2.4B deal
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NEW YORK (CNNfn) - Cardinal Health Inc. and R.P. Scherer Corp. have agreed to merge in a $2.4 billion pharmaceutical megadeal in which Scherer will become a wholly owned subsidiary of Cardinal.
Troy, Mich.-based R.P. Scherer -- not to be confused with Scherer Healthcare Corp. -- is the world's largest maker of the gelatin capsules used to encase drugs and vitamins, known as "softgels." Though softgel products account for 90 percent of Scherer's business, the company also applies the capsule technology to paint balls, skin care products and bath beads.
Cardinal Health Inc. based in Dublin, Ohio, is among the top three national wholesalers of pharmaceutical products, surgical and hospital supplies, and therapeutic plasma, to name a few lines. The company posted nearly $11 billion in total sales for the fiscal year ended in June 1997, the most recent for which figures are available.
Scherer (SHR) shares rose 5-1/2 to 82-15/16 on news of the merger Monday, as Cardinal (CAH) stock shed 4-5/8 points, dropping to 91-1/8.
(View Cardinal Health's one-year intraday stock chart)
Under the terms of a deal unveiled Monday, Scherer stockholders will receive 0.95 of a share of Cardinal Health common stock for each share of Scherer common stock.
(View R.P. Scherer's one-year intraday stock chart)
Cardinal will issue 23 million shares in the transaction and will assume $159 million in long-term debt that is included in the deal's total value. The merger is expected to close by late summer, subject to regulatory and shareholder approval. After its completion, Scherer will become a separate operating subsidiary of Cardinal Health.
The transaction's value is based on Cardinal's closing stock price Friday of $95.75 a share.
Robert Walter, Cardinal Health's chairman and chief executive officer, said the deal harnesses Scherer's strong relationships with drug manufacturers to Cardinal's "supply chain presence and market knowledge" to create an "unparalleled" opportunity in the $90 billion pharmaceutical industry.
Scherer's chairman and chief executive officer, George Fotiades, said the deal comes as his company "is poised to reap the benefits of the largest pipeline of new products and greatest number of manufacturer relationships in its history."
Fotiades mentioned Zydis, Scherer's fast-dissolving wafer technology, as one of the company's strong market prospects.
Scherer's proprietary drug-delivery systems, currently in development, help improve drugs' efficiency by regulating dosages and controlling the time and place of release.
Cardinal Health, a Fortune 200 company, is a component of the Standard & Poor's 500.
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