US drug manufacturer Pfizer has successfully bid to take over rival Wyeth for €52.4 billion ($68 billion), it announced early Monday, in what is the largest pharmaceutical deal in nearly a decade.
AFP - Pfizer agreed Monday to acquire rival Wyeth for 68 billion dollars, helping the world's biggest pharmaceutical firm diversify as it prepares for the expiration of patents on its blockbuster drugs.
The mega-deal comes amid a dearth of corporate dealmaking due in part to a credit squeeze, but Pfizer managed to line up 22.5 billion dollars in financing for the deal, the largest pharmaceutical takeover deal in nearly a decade.
Analysts say Pfizer, the maker of some of the world's biggest selling pharmaceuticals including the anti-cholesterol treatment Lipitor and erectile dysfunction drug Viagra, is aiming to widen its revenue stream some of its key drugs face competition from generic manufacturers.
Jeffrey Kindler, chairman and chief executive officer of Pfizer said the deal would "create the world's premier biopharmaceutical company."
"Our combined company will be one of the most diversified in the industry and will benefit from complementary patient-centric units that match speed with the benefits of a global company's scale and resources," said Kindler.
Pfizer struck the deal as it announced fourth-quarter profits fell 90 percent to 266 million dollars, dragged down by a 2.3 billion-dollar litigation settlement, but also hit by the loss of exclusivity of Norvasc for blood pressure, the antihistamine Zyrtec and the Camptosar cancer drug.
The New York-based firm said it would be cutting its global workforce by around 10 percent, eliminating jobs in sales, manufacturing, research and development, and administration. It will also reduce the number of manufacturing sites to 41 from 46.
The drug giant said revenues fell four percent from a year ago to 12.3 billion dollars in the fourth quarter, hurt by a stronger dollar against other currencies.
For full-year 2008, Pfizer recorded reported revenues of 48.3 billion, essentially flat compared with 2007 and profits unchanged from 2007 at 8.1 billion dollars.
Standard & Poor's said it placed Pfizer's credit rating on watch for a possible downgrade of its top AAA corporate rating.
"Although we believe the addition of Wyeth's products to Pfizer's portfolio would improve the company's overall diversification and reduce its reliance on best-seller Lipitor, we believe that it would only modestly reduce the proportion of revenues exposed to generic competition through 2011," S&P said in a research note.
"In our view, Pfizer may need to take other actions to mitigate the expected revenue and earnings losses."
Pfizer shares fell 8.4 percent while Wyeth rose 0.72 percent.
Gregori Volokhine, analyst at Meeschaert New York, said that "one has to wonder if this is an act of desperation by Pfizer."
Douglas McIntyre at 24/7 Wall Street said Pfizer nonetheless managed to pull off the financing despite difficult credit conditions.
"The conventional wisdom is that acquisitions in a recession are too risky," he said.
"They require capital and integrating companies is hard even when the economy is strong ... The next wave of (mergers), which will almost certainly begin within the month, is one designed at helping troubled companies survive by pressing cost cuts through consolidation of common functions."
The acquisition will be financed through a combination of cash, debt and stock, and a consortium of banks has agreed to provide a total of 22.5 billion dollars to finance it.
The boards of directors of both companies have approved the merger.
Wyeth president and CEO Bernard Poussot said that combining with Pfizer will accelerate the company's "pursuit of innovative new medicines to meet critical unmet patient needs."
The deal appears to be the biggest takeover in the pharmaceutical sector since Pfizer acquired Warner-Lambert Co. for 93.4 billion dollars in 2000.
The combined company will be number one in terms of biopharmaceutical revenues in the United States with a market share of about 12 percent.
It will hold about 10 percent of the market in Europe, seven percent in Asia with the exception of Japan, and six percent in Latin America.
Pfizer, founded in 1849, employs about 81,900 people in more than 150 countries around the world.
Date created : 2009-01-26