Pfizer to acquire rival Wyeth for $68 billion

Pfizer is to acquire US rival Wyeth for about $68 billion the two companies have announced.

The merger is designed to allow Pfizer to protect itself from a drop in revenues when its blockbuster drug Lipitor and other products lose patent protection.

Separately, Pfizer has announced plans to cut 10 per cent of its global workforce, a loss of 8,000 jobs, and to close a number of manufacturing sites. It has also reported a 90 per cent drop in profit to $268 million in fourth quarter in part due to a $2.3bn legal settlement.

Both companies have substantial operations in the State with Pfizer Ireland employing around 2,000 staff at five manufacturing sites in Cork and Dublin and manufactures active ingredients, bio-logics and sterile products.

Wyeth Ireland has developed an advanced biotech plant at Grange Castle outside Dublin and has five separate operations in Ireland, employing more than 3,500.

Asked about the implications of the merger for the Irish operations of both companies a spokeswoman for Pfizer Ireland said: "Given that the merger agreement has just been declared it is premature to speculate on either the impact or opportunities that this might present in Ireland in the longer term.

"The combined company will create one of the most diversified companies in the global health care industry, allowing it to respond to the unmet needs of patients, doctors and customers in Ireland and around the world."

In relation to the job cuts she said the company is still working on the plan so "it would be premature to comment specifically on where the reductions will take place".

The merger is expected to generate cost savings of approximately $4 billion, prompting the possibility of consolidation of overlapping services.

Pfizer faces greater pressure than many of its peers, because its blockbuster anti-cholesterol drug Lipitor – accounting for almost one-third of its revenue – goes off-patent in 2011. A significant number of Pfizer's staff in Cork are involved in the production of Lipitor.

The world's largest drugmaker, which raised $22.5 billion in debt from a consortium of banks to finance the deal, also cut its dividend.

The deal is expected to help Pfizer diversify into vaccines and injectable biologic medicines by adding Wyeth's big-selling Prevnar vaccine for childhood infections and Enbrel rheumatoid arthritis treatment. Pfizer would also realize major cost savings by streamlining areas that overlap.

For each share of Wyeth, Pfizer will pay roughly $50.19 to $33 in cash and 0.985 of a share of its stock.

Based on Wyeth's 1.33 billion shares outstanding as of October 31st, the deal would be valued at about $66.8 billion. Including Wyeth's stock options, the deal would be worth $68 billion, sources said.

At $50.19 per share, the deal would mark a 15 per cent premium over Wyeth's closing stock price of $43.74 on Friday. Wyeth's stock had surged 12.6 per cent on Friday on news of the possible deal.

The deal is expected to add to Pfizer's adjusted diluted earnings per share in the second full year after closing and to result in cost savings of $4 billion by the third year.

Additional reporting Reuters