Pfizer makes $ 82.4 bn bid for Warner-Lambert

AmericanWarner, the proposed combination of Madison, NJ-based American Home and Morris Plains, NJ-based Warner-Lambert, would have $ 26 billion in annual sales.

Pfizer said it would offer 2.5 Pfizer shares for each share of Warner-Lambert outstanding.

The Pfizer bid values Warner-Lambert at $96.40 a share, based on Pfizer’s closing price Wednesday of 38-9/16, representing about a 15 percent premium over Warner-Lambert’s closing price on Wednesday of 84. In contrast, the American Home offer values Warner-Lambert at about $83.26 a share.

Pfizer said the only condition to its offer was that Warner-Lambert drop the $2 billion breakup fee and issuance of stock options included in its deal with American Home, which would prevent it from using pooling-of-interest accounting.

Warner-Lambert and American Home executives declined immediate comment.

Trading in the shares of Warner-Lambert, American Home and Pfizer was halted shortly after midday. Before the halt, Warner-Lambert fell 5/16 to 83-11/16, American Home fell 1-13/16 to 54 and Pfizer fell 1/2 to 38-1/16.

With less than an hour left before the end of the regular New York Stock Exchange session, the shares of all three companies resumed trading. Pfizer was off 11/16 at 37-7/8. Warner-Lambert was up 6-1/8 at 90-1/8 and American Home was down 2-15/16 at 52-7/8.

The $2 billion break-up fee included in Warner-Lambert’s deal with American Home, though large, was not considered unusually high when viewed as a percentage of the deal’s overall value, merger experts said.

American Home and Warner-Lambert late Wednesday said they would create a new holding company to be called American Warner and shareholders would own about half of the new company.

American Home shareholders would receive one share of AmericanWarner for each of their shares, and Warner-Lambert shareholders would receive 1.4919 new company shares for each of their shares.

Pfizer said it had repeatedly approached Warner-Lambert over the past several weeks to discuss a possible business combination, but noted its overtures had been rejected.

Warner-Lambert and Pfizer have had a co-marketing relationship since the 1997 launch of the cholesterol-lowering drug Lipitor.

AmeriCal Securities analyst Charles Engleberg said he believes a deal between Warner-Lambert and Pfizer makes more sense than a deal with American Home.

"We think a Pfizer and Warner deal would be a better marriage," Engleberg said, "because the most important product that Warner has is Lipitor, and we believe that the market for cholesterol-lowering drugs is barely being tapped."

Shares of other drug stocks rallied Thursday, after news of Pfizer’s unsolicited bid for Warner-Lambert.

Schering-Plough Corp. rose 4-9/16, or nearly 8 percent, to55-1/2; Eli Lilly and Co. rose 3-13/16, or more than 5 percent, to 75-11/16. Merck and Co. Inc. rose 7/8, or almost 1 percent, to 80.

"It certainly sends a very clear signal that there is going to be meaningful consolidation in the drug business," said Hugh Johnson, Chief investment officer at First Albany Corp.

"I think that is something that we knew, but I don’t think anybody thought it would be quite so dramatic as this," Johnson said. "This is pretty good news if you own drug company shares."