Pfizer to acquire rival Wyeth for $68 billion

Philadelphia, United States, January 27: Pharmaceutical giant Pfizer plans to acquire competitor Wyeth for $68 billion by raising $22 billion in debt.

For each Wyeth share, the company has decided to pay $50.19 that includes $33 in cash and 0.985 share of its stock. That implies a 29 percent premium over Wyeth’s closing share price on Thursday last week.

An analyst at Caris and Co., David Moskowitz, remarked, “Given that there is a sizable amount of debt financing that has to occur, you would expect more risk to be built in.”

Experts feel that the securing of a major part of the finance by Pfizer is a positive development.

President of Princeton Financial Group, Andre Bakhos, was quoted as saying, “Deals of this quality and this magnitude will rekindle enthusiasm and hope about equity markets. In the midst of a global recession, here is Pfizer, hopefully spending their dollars wisely.”

It is being expected that the proposed acquisition by Pfizer would reform the pharmaceutical industry.

New York-based Pfizer, which anticipates dismal profits for 2009, said it would impose a 15 percent cut on the combined company’s workforce that includes around 130,000 employees, and shut down some manufacturing sites.

The deal, the third largest of its kind since 1998, would enable Pfizer to plug a significant gap in revenue in 2011, when its cholesterol treatment Lipitor would be face-to-face with U.S. generic challenges.

The acquisition would also help Pfizer branch out into vaccines and injectable biologic medicines. This it will accomplish by adding Wyeth’s popular Prenvar vaccine for infections in children and its treatment for rheumatoid arthritis- Enbrel.

Pfizer would also incorporate consumer health business of Wyeth that comprises Advil painkillers.

It is being thought that the deal would increase the company’s earnings in the second full year after closing. Also, savings of $4 billion by the third year are expected.

Michael Castor, Sio Capital Management’s portfolio manager, said, “An acquisition of this nature can be valuable if management recognizes how rich their spending is and really cuts to maximize the profitability of the new organization. $4 billion in cuts is a good first step.”