UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
October 8, 1998
Date of Report (Date of earliest event reported)
Commission file number 1-11885
______________________________________________________________________________
ALLEGIANCE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
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1430 Waukegan Road 36-4095179
Delaware McGaw Park, Illinois (I.R.S. Employer Identification No.)
(Jurisdiction of Incorporation (Address of Principal Executive
or Organization) Offices)
60085
(Zip Code)
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Registrant's telephone number, including area code: (847) 689-8410
______________________________________________________________________________
Item 5. Other Events.
On October 9, 1998, Cardinal Health, Inc. ("Cardinal"), and
Allegiance Corporation ("Allegiance") announced that they have entered into an
Agreement and Plan of Merger, dated as of October 8, 1998 (the "Merger
Agreement"), pursuant to which Boxes Merger Corp., a newly formed wholly owned
subsidiary of Cardinal, will be merged with and into Allegiance (the
"Merger"). Under the terms of the Merger Agreement, stockholders of
Allegiance will receive 0.4150 (the "Exchange Ratio") of a Cardinal Common
Share for each share of Allegiance Common Stock they hold. Upon the
completion of Cardinal's previously announced 3-for-2 stock split (the record
date for which is October 9, 1998, and the payment date for which is October
30, 1998), the Exchange Ratio will be adjusted so that stockholders of
Allegiance will receive 0.6225 of a Cardinal Common Share for each share of
Allegiance Common Stock they hold. The Merger is intended to be tax-free and
to qualify as a pooling of interests for financial reporting purposes.
Consummation of the transaction is subject to the satisfaction of certain
conditions, including approvals by the stockholders of Allegiance and the
shareholders of Cardinal and receipt of certain regulatory approvals, and is
expected to be completed in the first half of calendar 1999. Upon
consummation of the Merger, Cardinal will assume all of Allegiance's long-term
debt, which totaled approximately $890 million as of October 9, 1998.
In connection with the execution of the Merger Agreement,
Allegiance and Cardinal entered into a Stock Option Agreement, dated October
8, 1998, pursuant to which Allegiance granted Cardinal an option, exercisable
under certain circumstances specified in such agreement, to purchase up to
22,284,538 shares of Allegiance Common Stock (approximately 19.9% of the
outstanding shares of Allegiance Common Stock, without giving effect to the
exercise of the option), at a purchase price per share of the lower of $38.46
or the product of the Exchange Ratio times the average of the closing prices
(or, if such securities should not trade on a given day, the average of the
bid and ask prices therefor on such day) of the Cardinal Common Shares as
reported on the NYSE Composite Tape during the five consecutive trading days
ending on (and including) the trading day immediately prior to the day the
option is exercised.
In connection with the execution of the Merger Agreement, Mr.
Lester B. Knight, the Chairman and Chief Executive Officer of Allegiance, and
Mr. Joseph F. Damico, the President and Chief Operating Officer of Allegiance,
entered into Support/Voting Agreements, each dated October 8, 1998, with
Cardinal, pursuant to which Messrs. Knight and Damico agreed to take certain
actions in connection with the proposed Merger, including voting the shares of
Allegiance Common Stock beneficially owned by them in favor of the Merger at
any meeting of stockholders held to consider the Merger. Mr. Knight
beneficially owns approximately 1.5%, and Mr. Damico beneficially owns
approximately 1.0%, of the outstanding shares of Allegiance Common Stock.
In connection with the proposed Merger, Cardinal and Allegiance
also announced that they believe that the combination of Cardinal and
Allegiance will generate substantial revenue enhancement opportunities and
cost savings, which are believed to exceed $50 million within two years
following completion of the Merger, and that, based upon current information,
Allegiance's earnings growth rate will be in excess of 30% in calendar year
1998 and that the combined company is expected to achieve growth rates of 20%
or more following the Merger.
Allegiance's Board of Directors also announced that it has
rescinded two previously authorized 6 million share repurchase programs which
were announced in November 1997 and July 1998. Allegiance had repurchased
approximately 5.8 million of the 12 million shares authorized.
In connection with the Merger Agreement, Allegiance amended
Allegiance's Rights Agreement dated as of September 30, 1996 between
Allegiance and First Chicago Trust Company of New York, as Rights Agent.
Certain statements in this report constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Statements indicating Allegiance "plans," "expects," "estimates" or
"believes" are forward-looking statements that involve known and unknown
risks, including, but not limited to, general economic and business
conditions, changing trends in the health-care industry and customer profiles,
competition, changes in governmental regulations, and unfavorable foreign
currency fluctuations. Although Allegiance believes its expectations with
respect to the forward-looking statements are based upon reasonable
assumptions within the bounds of its knowledge of its business and operations,
there can be no assurance that actual results, performance or achievements of
Allegiance will not differ materially from any future results, performance or
achievements expressed or implied by such forward-looking statements. In
accordance with "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995, Allegiance provides cautionary statements, detailed in
Securities and Exchange Commission filings, including, without limitation,
Allegiance's Form 10-K and 10-Qs, which identify specific factors that would
cause actual results or events to differ materially from those described in
the forward-looking statements. Allegiance undertakes no obligation to update
publicly any forwarding-looking statement whether as a result of new
information, future events or otherwise.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, hereunto duly authorized.
ALLEGIANCE CORPORATION
By: /s/ Peter B. McKee
-----------------------------
Name: Peter B. McKee
Title: Senior Vice President and
Chief Financial Officer
Date: October 12, 1998
