Pfizer Inc. is buying Warner-Lambert Co. for $90
billion in stock in a deal that creates the world's second-largest
pharmaceutical company and ends a bruising three-month takeover
|Pfizer, the maker of Viagra, is buying Warner-Lambert, which makes Lipitor, for $90 billion in stock.
The combined company's medicine cabinet includes the impotence
treatment Viagra and Lipitor, the blockbuster cholesterol fighting
The deal announced today marks the end of a takeover fight that
started in November when Warner-Lambert announced a $62.1 billion
merger with its New Jersey neighbor American Home Products Corp.
Pfizer promptly indicated it was interested in Warner-Lambert.
American Home Products will be paid $1.8 billion - the largest
breakup fee in history - to sever its contract with Warner-Lambert.
American Home Products, which makes the hormone replacement drug
Premarin, decided not to wage a lengthy and expensive court battle
to stop Pfizer, according to a person involved in the deal speaking
on condition of anonymity.
Investors cheered the resolution of the fight, pushing shares of
all three companies up in early trading today on the New York Stock
Exchange. Warner-Lambert rose $2.06 to $96.62 at late morning,
Pfizer was up 75 cents to $36.50 and American Home Products was up
$2.06 to $47.56.
American Home Products could use the windfall as a cushion
against larger-than-expected verdicts or settlements related to its
fen-phen diet drug combination. The company has already set aside
$4.7 billion for such claims.
The combined Pfizer-Warner-Lambert will have annual revenues of
approximately $28 billion, including $21 billion in prescription
drug sales, the companies said.
"By combining two world-class organizations to create the
fastest-growing, major pharmaceutical company in the world, we are
positioned for global leadership in the discovery of new medicines
that will benefit millions of patients around the world," said
William C. Steere Jr., chairman and chief executive of Pfizer. He
will retain those titles at the combined company.
But while Pfizer won its hostile bid for Warner-Lambert,
relations between the top executives are anything but friendly.
Warner-Lambert's chairman and chief executive officer, Lodewijk
J.R. de Vink, will leave the company after the deal closes, the
De Vink, 54, who joined Warner-Lambert in 1988, became chairman
and chief executive officer in April. Under the company's golden
parachute plan, de Vink's will get three years' salary and bonus
(before he became CEO he made about $2 million a year), and his
stock options have a market value of $245 million, based on
De Vink won't be the only one out of a job. Pfizer also is
expected to cut hundreds of jobs - most of them from Warner-Lambert
- from their combined work force of 87,400 as the two companies
unite their sales and research teams as well as consolidate
Those job cuts will be part of the company's estimated $1.6
billion in cost savings by 2002.
"There's going to be a certain amount of discomfort when there
is change like this," de Vink said in an interview. But, he added,
for those employees laid off, "it's a good market for finding
The combined company will keep Pfizer's name and headquarters in
New York. Warner-Lambert's headquarters in Morris Plains, N.J.,
will become the base for the consumer products division, which will
include household names like Listerine, Rolaids, Bain de Soleil and
The newly merged company will have profits of $4.9 billion and a
research budget of $4.7 billion. Still, the new-and-improved Pfizer
will only control about 6.3 percent of the world's medicine market,
assuaging most antitrust concerns.
This is the third pharmaceutical takeover as many months. Last
month, Glaxo Wellcome PLC struck a $76 billion deal to acquire
SmithKline Beecham PLC to become the world's largest pharmaceutical
company. In December, Pharmacia & Upjohn Co. announced a $27
billion merger with Monsanto Co.
And the trend likely will continue.
American Home Products is expected to find another partner soon.
The company is expected to sell its agricultural chemical business
by June, according to a person familiar with the company's plans.
That should make American Home Products a more attractive takeover
The agricultural division, known as American Cyanamid, is
expected to fetch about $3 billion. Prospective buyers include Dow
Chemical Co., E.I. Dupont De Nemours & Co. and in Europe, Bayer AG
and BASF AG.
Under the terms of Pfizer's deal with Warner-Lambert. Pfizer
will issue 2.75 shares of its stock, worth about $98.31 based on
Friday's closing price, for each share of Warner-Lambert.
Warner-Lambert shareholders will own 39 percent of the combined
company and eight independent directors from Warner-Lambert's board
will be invited to join Pfizer's board, which would increase in the
size of the board to 23.