Cardinal uncovers questionable Syncor payments

Healthcare giant Cardinal Health has uncovered evidence of "questionable payments" at Syncor International, the Woodland Hills, CA-based radiopharmaceutical company that Cardinal has proposed to acquire. The payments were uncovered during Cardinal’s due diligence process as part of the deal.

Cardinal Health announced last June that it was planning to buy Syncor in a deal worth $1.1 billion. Syncor would become a wholly owned subsidiary of Cardinal under the terms of the acquisition.

During the due diligence period following the merger agreement, Cardinal learned of the payments and notified Syncor. An investigation by a committee of outside Syncor directors and a special outside counsel found that certain payments by overseas Syncor subsidiaries to state-owned and private healthcare facilities in several countries, including Taiwan and China, may have violated international and U.S. law.

Syncor chairman Monty Fu and his brother, Moses Fu, the company’s Asia regional director, have gone on paid leave pending completion of the investigation. In their places, Syncor’s board of directors has appointed a special interim lead director of the board.

Syncor said it doesn’t believe that the results of the investigation should stand in the way of the Cardinal deal. Syncor sources said Cardinal was reviewing the matter and had not yet concluded whether conditions to the merger agreement will be satisfied.

Syncor also said this week that it did not believe the amounts of the payments are material to the company’s financial results, and that the company would report its quarterly results for the period ended September 30, 2002 in a timely manner. The company said that it could not determine the impact of the investigation until it is completed.

The acquisition had cleared the U.S. government’s Hart-Scott-Rodino waiting period and awaited approval by Syncor’s stockholders at their fall meeting, originally scheduled for November 19. That meeting has been postponed until December 6.

By AuntMinnie.com staff writers
November 6, 2002

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