SYNCOR BOUGHT CARDINAL DRUG DEAL SUSTAINS GROWTH SPREE.

Byline: Evan Pondel Staff Writer

WOODLAND HILLS - Drug distributor Cardinal Health Inc. said Friday it will buy radiopharmacy leader Syncor International Corp. for more than $1 billion, a deal some analysts view as undervalued.

Dublin, Ohio-based Cardinal, which has been on a buying spree the last several years to position itself as a leading medical wholesaler, will exchange stock valued at more than $872 million and assume $202 million of Syncor's debt.

With its headquarters a significant presence on the Woodland Hills skyline, Syncor's prowess in distributing radiopharmaceuticals ultimately led to its purchase, according to Cardinal executives.

``This is an important step that will strengthen our presence in the health care market,'' Robert Walter, chairman and chief executive of Cardinal, said during a conference call. ``And Syncor has an entrepreneurial culture similar to ours.''

What remains unknown is whether Syncor shareholders harbor the same sentiment. The latest agreement calls for Syncor shareholders to receive 0.52 of a Cardinal common share for each Syncor share. Based on Cardinal health's closing price Thursday, each Syncor share would be valued at $32.42, about a 15 percent premium.

``I thought the premium was definitely lacking,'' said Andrew Speller, analyst with A.G. Edwards & Sons Inc. in St. Louis. ``How the valuation came about is surprising from my perspective. I had valued Syncor assets much higher than that.''

As of Friday's close, Cardinal Health declined 41 cents to $61.94, while Syncor advanced $3.24, or 11.5 percent, to $31.45.

Despite the premium's unfavorable showing on Wall Street, Robert Funari, chief executive officer and president of Syncor since 1996, seemed confident, almost ebullient, about the purchase.

``We are delighted to be joining the Cardinal family of businesses,'' said Funari, who has been with the company for more than eight years.

Of Syncor's approximately 24.78 million shares outstanding, employees own about 12 percent; the company's officers, including founder Monty Fu, hold around 8 percent; Funari has about a 4 percent stake; and Haig Bagerdjian, executive vice president and CEO of Syncor Overseas Ltd., owns about 3.5 percent, Speller said.

``All told, officers own up to roughly 19 percent,'' he said. Despite the low premium, Speller does not foresee a problem in the completion of the acquisition.

The transaction, subject to approval by regulators and Syncor shareholders, is expected to close by the end of 2002.

Cardinal has yet to determine how the transaction will affect Syncor's employees, with around 250 based in Woodland Hills and 3,750 elsewhere in the world.

``Nothing will change for the short term ... and once the acquisition is final, the integration will determine a plan that makes sense for customers and employees,'' Walter said.

Though Cardinal doesn't anticipate any immediate layoffs, Syncor will part with its medical-imaging business before or soon after the closure of the deal.

Syncor is among the largest providers of outpatient imaging services in the U.S. The company expects to incur a second-quarter charge of $22 million to $24 million that's related to the potential sale of the imaging centers. The charge also includes the reorganization of Syncor's international operations and other operating charges.

While Syncor is poised to exit its medical imaging arm, the company's radiopharmaceutical business is expected to benefit greatly from Cardinal's access to capital. Syncor has dominated a niche market distributing compounds that doctors give patients in order to diagnose cancer and heart complications, Speller said.

Though nuclear medicine isn't a new area for Cardinal - the company acquired Bindley Western Industries in February 2001 - analysts say the addition of Syncor will create a powerful force.

``Syncor is marrying up with a very good partner,'' said David Windley, analyst with Jeffries & Co. Inc. in Tennessee. ``Even though in the short term the investment may not look good, I'm pretty confident in its long-term implications.''

Syncor controls more than 50 percent of the radiopharmaceuticals market and the company serves more than 7,000 hospitals and clinics worldwide - two characteristics that will bolster Cardinal's profitability, Windley said.

For Syncor, a company that's been around for more than 25 years, Cardinal's purchase also suggests a new beginning. Syncor had a 2001 net income of $38.6 million on sales of $808.8 million. And while those are healthy figures given the economic conditions, Windley said the company was ``about to hit a wall.''

As a distributor of Bristol-Myers Squibb's Cardiolite, Syncor has been working to reduce its dependence on this radiopharmaceutical blockbuster. Now, with Cardinal aboard, the company can focus its delivery services, Windley said.

``The acquisition will make them a better player down the road,'' Windley said. ``Especially with the bad news right now coming out of pharma.''

CAPTION(S):

photo, box

Photo:

(color) Syncor International Corp., which occupies a high-profile position in Woodland Hills, faces a slew of changes in the future.

Joe Binoya/Special to the Daily News

Box:

Syncor, Cardinal Health

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