OC Businessperson Of The Year: Robert Martini
Venerable Executive Crowns Turnaround with Deal of Career
By VITA REED
By dollar value alone, the August minting of AmerisourceBergen Corp.,a drug distributor with $35 billion in yearly sales,will go down as the greatest deal of Robert Martini’s career.
But Martini, the former chief executive of Orange-based Bergen Brunswig Corp., doesn’t see it that way.
“The deal of my career?” asked Martini in his soft, baritone voice. “I would have to say the deal of my career was putting Bergen Drug Co. with Brunswig Drug Co., which goes back to 1969. That transaction was really the stepping stone for the building of Bergen Brunswig Corp.”
Even so, it is Martini’s revitalization of Bergen Brunswig and its resulting acquisition by Valley Forge, Pa.-based AmeriSource Health Corp. that earned the 69-year-old recognition as the Business Journal’s 2001 businessperson of the year.
The AmeriSource deal proved the crowning feat for Martini, the son of the founder of Bergen Brunswig precursor Bergen Drug. The combination capped Martini’s return from semi-retirement in 1999 and his two-year turnaround of Bergen, which floundered after two difficult acquisitions and 1998’s failed takeover of Cardinal Health Inc. of Columbus, Ohio.
“He got (Bergen) totally back on track, with or without the merger” with AmeriSource, said Jon Green, an analyst with Dresdner Kleinwort Wasserstein in New York.
“Given his financial stake, his stock ownership,he did what needed to be done,” said Andrew Speller, a pharmaceutical distribution analyst with A.G. Edwards & Sons Inc. in St. Louis.
How AmerisourceBergen fares in the history of corporate combinations remains to be seen. So far, Wall Street has looked favorably on the supplier of pharmaceuticals and other products to drug stores, hospitals and other healthcare providers. The new company counted a market value of about $7 billion last week.
What is clear is that AmerisourceBergen has ushered in the twilight of Martini’s venerable career. (One of this year’s businessperson of the year honorable mentions, Fluor Corp.’s Philip J. Carroll Jr., also is stepping back after a noteworthy 2001.)
Martini is AmerisourceBergen’s non-executive chairman, an eventful job so far (see related story page 9). While Martini said he’ll serve as long as the board will have him, his days of running things are over. What’s left is a legacy.
“I’d like to feel that we’ve added to the health equation throughout this country by keeping costs down and making products readily available,” Martini said. “The pharma distributor has become a much more important factor in the healthcare delivery system. We’ve reduced costs every year over those 32 years. Even though pharma medication may be considered to be high in price, the part that we’ve played in it is to really control costs and keep costs low.”
While Martini may not view AmerisourceBergen as the deal of his career, he said he has strong feelings about it.
“I do believe it was essential for Bergen to merge, and particularly with AmeriSource because there were many similarities in the way both businesses were run,” Martini said. “(We) think that the combination of the two will make it much easier for the combined companies to compete in the future markets more efficiently, successfully. And it will be better for our customers and our shareholders.”
Back in February 2000, Martini started talking with his counterpart at AmeriSource, R. David Yost, now chief executive of AmerisourceBergen, about a combination. The two reached an initial pact in July 2000 and turned to their lawyers to draw up terms of a deal. But the executives ended up passing the first time around.
“We were not prepared to go forward with a transaction that we didn’t believe could get done,” Martini said.
After all, Martini had been through this before. AmerisourceBergen came about some three years after the Federal Trade Commission squashed Bergen’s proposed buy of Cardinal Health. Regulators objected to the Cardinal deal and another proposed combination between AmeriSource and San Francisco-based McKesson HBOC Inc., fearing erosion of competition in the wholesale drug distribution market.
But by late 2000, the drug distribution industry landscape shifted. Cardinal said it was planning to buy Bindley Western Industries Inc., a smaller Indianapolis-based rival, in a deal completed in February of last year.
“Frankly, recognizing that the deal now could get done caused us to focus more on how to get it done,” Martini said. “I’m talking now from a financial standpoint of view, a people standpoint, customers, etc.”
Talks between AmeriSource and Bergen intensified in January 2001, centering on management of the combined company and required regulatory approvals. In March, the companies announced that AmeriSource planned to buy Bergen for about $4.5 billion in stock and debt.
Analysts said the AmeriSource-Bergen deal had better chances of going through because it stood to leave the wholesale drug distribution field with three strong players with roughly equal market share. By contrast, the failed 1998 pacts between Bergen and Cardinal and AmeriSource and McKesson would have created two distribution behemoths.
AmerisourceBergen is headquartered in Valley Forge,wiping away Orange County’s second-largest public company by sales after Santa Ana-based Ingram Micro Inc. But Martini said the new company plans to keep a major California presence, including Bergen’s former Orange headquarters and its distribution center in Corona.
Bergen’s acquisition by AmeriSource is remarkable because when Martini retook the helm in 1999, Bergen didn’t look attractive to anyone. Then-chief executive Donald Roden, who Martini tapped to replace him in 1996, was pink-slipped amid a falling stock price and two acquisitions Bergen later would realize it paid too much for.
“If the board of directors calls you, you have to respond,” Martini recalled, chuckling. “The immediate challenge was to identify the difficulties. I would just summarize it by saying there was an insufficient amount of cash to run the businesses in an efficient way.”
Martini set out to streamline Bergen. In July 2000, Bergen agreed to sell its Stadtlander Drug Co. to CVS Corp. for $120 million. That was far below the $400 million it originally paid Counsel Corp. for Stadtlander, which makes medications for people with the HIV virus.
Next on the block was Bergen Brunswig Medical Corp., which was sold in August 2000 to Cardinal’s Allegiance Corp. unit for $181 million. In September 2000, the company also took a $500 million charge from the writedown of goodwill from its PharMerica Inc. unit, a supplier of drugs to long-term care facilities.
“He cleaned up some difficult businesses,” said Raymond Falci, a senior managing director and healthcare information technology analyst with Bear, Stearns & Co. in New York. “He made some good moves, including divesting Stadtlander and (retrenching) PharMerica. PharMerica is a nice business now.”
At the time of Martini’s 1999 return, Bergen’s stock price had slid deeply to around 8. By mid-2001, the company’s shares were enjoying a revival.
“Most important, we improved shareholder value by about 400%, something like that,” Martini said.
AmeriSource’s buy of Bergen was a “fair transaction” in terms of how much the new company drew from AmeriSource and Bergen elements, Martini said.
Still, Martini said: “Unfortunately, we will have to go through the painful process of consolidation, which means displacement of some people. But that will be good for those that remain on.”
Although Bergen Brunswig went public in the 1960s, it had an enduring image as a family business. Emil Martini Sr., Robert Martini’s father, founded Bergen Drug around 1947 in a converted garage in Hackensack, N.J.
Robert Martini, who turns 70 at the end of this month, is a pharmacist by training who came to Bergen Drug in 1956. He and older brother Emil Jr. ran the company for many years. Martini became chairman and chief executive of Bergen in 1992, after Emil Jr.’s death.
The Martini family ties also include Robert’s son Brent Martini, now president of AmerisourceBergen Drug Corp., a large unit of the new company.
“Bob has a unique talent in that whether it is in a social environment or a business environment, he never makes you feel like he is the president or the CEO,” the younger Martini said. “He is absolutely a master at listening to people.”
Brent Martini said his father’s business style is marked by modesty, a desire to see others succeed and an interest in positioning Bergen as a technology leader. Brent said he did not work closely with his father for about 12 years. The two didn’t feel it was appropriate to compromise colleagues with a father-son relationship, he said. But their working relationship became a side-by-side one as Bergen was being turned around, he said.
“I’ve enjoyed my tenure with this company,” Robert Martini said. “There are very nice people in this industry, so it’s been a joy. There’s been some pretty hard work, but it’s really been a great ride.
HONORABLE MENTIONS
Philip Carroll
Matt Massengill
Michael McKee
The Honor and the Challenge
Wish Robert Martini luck.
Our past businesspeople of the year have gone on to succumb to the Business Journal’s equivalent of the Sports Illustrated jinx by hitting tough times following their honor.
Consider some recent honorees: 1998’s Henry Samueli and Henry Nicholas of Broadcom Corp. and 1999’s Dwight Decker of Conexant Systems Inc. All three have seen the technology downturn take its toll on their companies.
The jinx goes beyond tech. In 1994, George Argyros was tapped for his work for an El Toro airport. Well, we all know where that stands. In 1992 Peter Ueberroth was named for his work with Rebuild LA. He resigned three months later to mixed reviews.
The good news for Martini is that his stakes aren’t as high. 2002 surely will be challenging for him. But he’s also stepping back from running things day-to-day.
And Martini can find encouragement from last year’s honoree, David Pyott of Allergan Inc. Pyott defied the jinx in the critical 12 months following his honor. Allergan didn’t fare as well on Wall Street last year as it did in 2000, but the company enjoyed solid, profitable growth and continued to expand.
2001 honorable mention John Wareham of Beckman Coulter Inc. also had a good year.
But the jinx lives.
2000 honorable mention Robert Deuster of Newport Corp. saw his company’s heady growth crumble with the fiber-optic bust last year. Broadcom’s Nicholas and Samueli saw the tech downturn go from bad to worse. Oakley Inc.’s Jim Jannard had an OK year but tangled with retailer Sunglass Hut.
Congratulations Bob, and good luck.
,Michael Lyster
