BREAKFAST WITH THE FOOL
Monday, February 7, 2000
"Our doubts are traitors... and make us lose the good we oft might win."
-- Shakespeare
Pfizer Pfinally Lands Warner-Lambert
By
Richard McCaffery (TMF Gibson)
Viagra manufacturer Pfizer (NYSE: PFE) has reached a deal worth $84 billion to acquire pharmaceutical company Warner-Lambert (NYSE: WLA), and former suitor American Home Products (NYSE: AHP) has agreed to walk away with a $1.8 billion breakup fee, according to The Wall Street Journal.
Pfizer's board of directors agreed to the deal last night and Warner-Lambert's board is expected to reach agreement quickly. An announcement is expected today.
While Pfizer and Warner-Lambert reportedly reached agreement in principle last week, the boards hadn't voted and American Home Products still stood in the way. In addition to the hefty breakup fee, American Home was seeking around $200 million in additional compensation, the Journal reported.
American Home Products has decided to cut its losses. The manufacturer of Advil, Premarin, and Preparation H has now had deals with Warner-Lambert, Monsanto (NYSE: MTC), and SmithKline Beecham (NYSE: SBH) fall apart within the last two years. But this time it's going to walk away with $1.8 billion, leaving the company in a good position to proceed on its own or seek another partner.
The acquisition ends a hostile three-month takeover battle, initiated by Pfizer shortly after American Home Products and Warner-Lambert agreed to merge in a $72 billion deal November 4. Pfizer, which co-markets and shares the profits of Warner-Lambert's cholesterol-fighting drug Lipitor, stepped in with an $82.4 billion bid. Lipitor sales hit $3 billion last year and Pfizer did not want to risk losing its cut.
Basically, Pfizer's higher stock price and enormous market capitalization won the day. The company will offer 2.75 shares of its stock in exchange for each share of Warner-Lambert. The deal works out to about $98 a share and is 10% higher than Pfizer's original bid.
The combined company will be the world's second-largest drug company, second to SmithKline and British firm Glaxo Wellcome (NYSE: GLX), which agreed to merge last month. The company will have combined revenues of $28 billion, a $4 billion research and development budget, and plans to save $1.2 billion by eliminating overlapping operations.
William Steere, Pfizer's chairman and chief executive, will run the company. Lodewijk J.R. de Vink, Warner-Lambert's chairman and chief executive, is not expected to remain with the company, though he'll serve as a consultant to help combine the two operations. Pfizer expects to be able to grow its earnings 25% annually over the next three years, the Journal reported.
News to Go
Speedy Internet service delivery company Akamai Technologies (Nasdaq: AKAM) has reached an agreement to buy InterVu (Nasdaq: ITVU) for $2.8 billion in stock. Each share of InterVu will be exchanged for 0.5957 shares of Akamai. InterVu's technology allows companies to broadcast video and audio content over the Web.
Internet service management company Visual Networks (Nasdaq: VNWK) has signed an agreement to buy privately held Avesta Technologies for about $415 million in stock. Avesta makes software that manages e-business infrastructure.
Consumer food company Bestfoods (NYSE: BFO) has acquired Brazilian food company Arisco Industrial, Bloomberg reported. The deal is reportedly worth around $1 billion. Privately held Arisco makes over 750 products and has sales of about $570 million.
Financier Carl Icahn has bought a 6.7% stake in food company Nabisco Holdings Group. (NYSE: NGH) because he believes the shares are undervalued and may try to light a fire under management. Icahn has waged proxy fights at the company before. The move is seen as the latest step in a battle he's been fighting since 1995, Bloomberg reported.
More Foolishness
Understand the drawbacks to taking money out of a Roth IRA... Check out how your favorite retailers did in the post-holiday period... See what's new in The Motley Fool message boards.
