Bergen to Continue to Pay Dividend

After an 80% plunge in its stock price over the last year, Bergen Brunswig Corp. sought to reassure stockholders Tuesday by saying it is making a planned dividend payment and is confident about quickly refinancing $600 million in debt.

At an annual meeting marked by pointed questioning from shareholders, executives at the nation’s third-largest drug distributor outlined cost-cutting plans and indicated that they want to sell two troubled companies bought last year during an acquisition spree.

The purchases have increased the Orange-based company’s debt and sharply reduced profit.

“We have to [examine], and are examining, all of our assets,” said Robert E. Martini, Bergen’s chairman. Under-performers are “certainly going to be considered” for sale, he said.

Wall Street analysts were skeptical about the company’s decision to continue dividend payments and about the prospects of selling its PharMerica Inc. and Stadtlander Drug Co. subsidiaries.

“I’m pulling for them to pare down and focus on their core business,” said Larry Marsh, a senior vice president at Lehman Bros.

But some analysts wondered if the troubled acquisitions would draw any decent offers.

“They paid too much for assets that are not yielding what they expected,” said Andrew Speller, a senior analyst at A.G. Edwards.

And shareholders demanded to know why the company did not suspend or reduce the regular dividend payment of 7.5 cents a share to show its dedication to cut costs.

“This is not really a market that rewards paying dividends,” said John Ransom, an analyst at Raymond James.

But Martini said a significant number of shareholders are long-term investors who have told him they support continued dividend payments.

The $600-million debt, due in April, will be replaced with a $1.3-billion credit line with a longer maturity, said Bergen’s chief financial officer, Neil F. Dimick.

Because the term is longer and because credit-rating agencies have downgraded Bergen debt, Dimick estimated that the company will have to pay interest rates about 1.3 percentage points higher than previously for the funds.