Pfizer's $68 billion Wyeth deal eases Lipitor loss

Pfizer Inc, the world’s biggest drugmaker, will buy Wyeth for about $68 billion after failing to reduce its dependence on the cholesterol pill Lipitor with new drugs from its own research labs.

The deal, the largest pharmaceutical acquisition in almost a decade, is a cash-and-stock transaction valued at $50.19 a share, 29 per cent more than Wyeth’s $38.83 closing price on January 22, the day before talks were reported, the companies said today in a statement. Pfizer also will halve its quarterly dividend to 16 cents a share, fire 15 per cent of the combined company’s workforce, or 19,000 people, and close five factories.

Five banks pledged $22.5 billion in financing to support Pfizer’s bid. The New York-based drugmaker will gain the depression drug Effexor and pneumonia vaccine Prevnar to offset some of the $12 billion in sales it begins losing in 2011 when Lipitor gets generic competition. The cuts will save about $2 billion by 2011, Pfizer said.

“Pfizer is spending $7.5 billion a year in research and producing almost nothing, and now it has to buy Wyeth,” said Michael Krensavage, founder of Krensavage Asset Management in New York, in a telephone interview today. “If its pipeline were producing, it wouldn’t need to buy Wyeth.”

Pfizer fell $1.61, or 9.2 percent, to $15.84 at 10:37 a.m. in New York Stock Exchange composite trading, the biggest intraday decline since Oct. 9. Wyeth, based in Madison, New Jersey, fell 7 cents to $43.67.

Five Banks: The acquisition will be financed by Bank of America Corp, Barclays Plc, Citigroup Inc, Goldman Sachs Group Inc, and JPMorgan Chase & Co, Pfizer said. Morgan Stanley and Evercore Partners Inc. are counseling Wyeth.

Along with the $22.5 billion in borrowing, Pfizer will pay $22.5 billion in cash and about $23 billion in Pfizer shares, the company said. Wyeth’s shareholders will own 16 percent of the combined company.

Wyeth has withdrawn from talks to acquire Dutch vaccine- maker Crucell NV, the Leiden, Netherlands-based company said in a statement on Hugin newswire on Monday without giving a reason.

“Wyeth is without a doubt the perfect partner for Pfizer,” Pfizer Chief Executive Officer Jeffrey Kindler said today in a conference call with analysts. He said Pfizer’s “confidence in our ability to transition through an acquisition like this is very high.”

Kindler will lead the combined companies and Wyeth’s chief Bernard Poussot will step down after a transition period, Pfizer spokesman Ray Kerins said.

Termination Fee: Under the agreement, Wyeth is able to force Pfizer to complete the transaction unless the buyer’s debt rating falls below a certain threshold, allowing its lenders to get out of their financing commitments, said two people familiar with the matter. In that case, Wyeth would get a $4.5 billion termination fee. Pfizer’s Kerins declined to discuss the break-up fee.