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Food & drug administration
In 1971 an ambitious 26-year-old Harvard MBA named Robert D. Walter purchased Cardinal Foods, a small Ohio food wholesaler, in a leveraged buyout. After discovering there was little room left in the food distribution market, Walter turned to drug distribution instead. It wasn't long before Ohio's state bird had hit the pharmaceutical big leagues. Today, Cardinal Health is a $25 billion Fortune 100 company and one of the largest distributors of pharmaceuticals, health & beauty products, and hospital supplies in the United States. The pharmaceutical industry may not be known for drama, but Cardinal Health's transformation from a small potatoes food company into a major corporate player has been an engrossing business story.
Led by its widely admired CEO, Cardinal Health has grown from over 20 acquisitions throughout its history. In 1983 Walter took the company public as Cardinal Distribution, adding seven more drug distribution companies to his empire throughout the excessive 80s. Walter trimmed the fat off of Cardinal in 1988, selling its food group and narrowing its focus solely to pharmaceuticals. When the little red bird swallowed Whitmire Distribution in the fall of 1993, it rose from the nation's sixth-largest wholesale drug distributor to third place, with annual sales of $5 billion. Other companies joining the flock in the 1990's included PRN Services, a Michigan distributor, Medicine Shoppe International, the US's largest franchiser of independent retail pharmacies, Pyxis Corp. and Owen Healthcare. Cardinal scored a major coup in 1997 by signing a five-year, $9 billion contract to provide drugs for Kmart's 1,500 in-store pharmacies. Announcing that same year that Cardinal Health had doubled in size over five years, Walter's reign seemed unstoppable.
Wall Street tactics
Cardinal CEO Robert Walter's basic strategy drew widespread praise, by moving slowly, avoiding hostile takeovers, and staying focused on distribution instead of research & development or manufacturing, he soon gained a solid corner on the market. His smooth ascent reached a roadblock in 1997, however, when Cardinal (still in third place at the time) announced it would buy Bergen Brunswig Corp., the second-largest distributor in the country. The proposed $2.41 billion merger raised objections from the FTC, who voted to block it on the basis of anti-trust speculations. As if that wasn't enough drama for the drug industry, distribution leader McKesson Corp. announced it would spend $1.72 billion to acquire the No. 4 distributor, Amerisource Health Corporation. Rumors abounded that McKesson's plan was a strategic move designed to force the FTC to block the Cardinal/Bergen Brunswig merger. Simultaneous mergers of the top 4 pharmaceutical distributors would have resulted in two powerhouses controlling 67 percent of the market, with Cardinal landing in 1st place.
The next John Grisham
Drug distribution turned to courtroom drama in 1998 when the FTC took Cardinal to court. Ultimately, a Federal judge voted to block both mergers, arguing that the consolidation would substantially reduce competition. But Cardinal CEO Robert Walter had more tricks up his sleeve - if he couldn't buy another distributor then he would acquire manufacturers instead. In May 1998 Cardinal Health announced its purchase of R.P. Sherer Corporation for $2.2 billion, the nation's leading manufacturer of gel capsules, and the developer of a new wafer form for drugs. That fall, Cardinal paid $5.4 billion to add Allegiance Corporation, a leading maker of surgical supplies that greatly expands Cardinal's arena of wholesale pharmaceuticals. The merger also forms the possibility of international expansion, which is almost the only place Cardinal has left to go if it want to continue growing. It's definately the most promising, since the company has very few ventures abroad.
A bigger bird's nest
In spring 1999 Cardinal secured $2.6 million for an expansion of their headquarters onto 28 acres in Dublin, Ohio. The company will house over 1,000 employees in their new home, compared to only 250 employees in Dublin 5 years ago. Even before the move was complete, Cardinal was getting ready to expand again. The company purchased two new companies in June 1999, pharmaceutical consulting and staffing firms acquired to improve the company's services. One year later, Cardinal announced the formation of its newest company, Vistant Corporation, to apply its industry-leading Pyxis dispensing and logistic technologies and experience beyond the healthcare market.
Over the past couple of years, Cardinal has proven its dedication to the power of the Internet. Cardinal.com is the only online B-2-B marketplace that offers healthcare procurement, fulfillment, and information with accountability at every step in the supply chain. Thanks to the Internet, CArdinal believes that it will see an addition $2 billion in revenues by then end of 2001. Part of that money may be the result of Cardinal's partnership with four other companies, including McKesson, to sell their products on one site. Surviving lawsuits, headlines, and the glare of Wall Street's spotlight, Cardinal Health has successfully transformed itself from a small town food business into a $25 billion pharmaceutical success.
Cardinal's web site, www.cardinal-health.com provides further information on the company as well as a careers page that has links for job openings at the company's headquarters and subsidiaries. The job descriptions come complete with contact information and online applications. Cardinal's job listings are also available on their job line at (614) 757-5000. Opportunities include information systems, finance & accounting, marketing, and administration, and are available in Dublin, Ohio, as well as other locations. Resumes should be sent to the Dublin office and addressed to Corporate Human Resources.
An enriching environment
Given Cardinal's swift evolution and innovative CEO, it comes as little surprise that Cardinal insiders report a youthful and entrepreneurial culture. "Cardinal is a very fast paced company," says one insider, and "needless to say, it has been a very busy time, with new issues surfacing daily." While it is openly acknowledged that Cardinal's interests are financially driven, company policy promotes independent thinking: "The corporate culture within Cardinal is one of teamwork and progress" there's a constant need for new ideas, creativity, and efficiency. In my experience the upper management has been very receptive to new ideas, autonomy, and self-empowerment." Another insider agrees: "It's a very enriching environment with constant challenges and opportunities."
For those just entering the job market, Cardinal provides a supportive environment: "Cardinal loves its youth. They never say someone is too young for a responsibility." Diversity at Cardinal Health is also promoted: "Cardinal takes many steps to ensure equal treatment of all individuals regardless of sex, ethnic background, etc." One employee notes that "women outnumber men in practically every department." Most Cardinal insiders we heard from report satisfaction with their experience. "All in all," states one, "I would say my experience with Cardinal has been better than I'd expected. I have learned a great deal in the last seven months and feel that my career skills have accelerated immensely."
Anthony J. Rucci
Pharmaceuticals; Hospital supplies; Health & Beauty products
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