National Intergroup Inc. and Bergen Brunswig Corp. yesterday launched a public campaign to gain shareholder approval of their controversial merger, facing opponents who contend National is being sold too cheaply.
Howard M. Love, chairman of Pittsburgh-based National Intergroup, defended the proposal in an interview with reporters from several cities over a telephone hookup.
If the plan is approved, National shareholders would receive 1.225 shares of Los Angeles-based Bergen Brunswig for each of their shares. Yesterday, National closed at $32 a share, up $1. Bergen Brunswig closed at $26.50, up 50 cents, making the merger worth $659 million at that price.
Love said he knows of no one willing to pay much more than $32 a share for National, a metals, manufacturing and financial services company that has cut back substantially on its steel operations, the company's historic base.
But that view isn't shared by Leucadia National Corp., a New York insurance and finance firm that holds 7.2 percent of National and has informed the Securities and Exchange Commission that it will solicit shareholder votes against the merger. Leucadia and other critics argue National would be worth more if broken up and sold at auction.
Love contended a higher break-up value was not possible. "The closest we can get is $32 a share. . . . We're not deluged with calls." He also said that Bergen Brunswig would not pay "greenmail" to Leucadia or other investors who may be buying National stock in hopes of being bought out at a profit. "We've flat told them we're not paying greenmail," Love said.
The merger has also been criticized by T. Rowe Price Associates Inc., the Baltimore investment firm whose Growth and Income Fund holds 8.4 percent of National's stock. In all, institutional investors hold between 50 to 60 percent of National's stock, an inviting target for Leucadia, market analysts say.
Love and Emil P. Martini Jr., chairman and chief executive of Bergen Brunswig, will spend several weeks meeting with investors in major cities around the country, in hopes of selling their proposal.
Love offered no new insights yesterday into how the dissimilar operations of National and Bergen Brunswig could be melded to produce stronger performances by both operations.
Bergen, a fast-growing distributing company specializing in consumer, pharmaceutical and other health services products, with sales of $1.7 billion, can shield its profits with $500 million in operating losses carried on National's books. National benefits, said Love, by this opportunity to move from its base in the mature metals industries into a dynamic services business.
"What we bring is cash," said Love. "To say I understand the pharmaceutical business would be very presumptuous. We'll understand it."