Wyeth shareholders approve mega-merger with Pfizer
Jul 20th 2009 1:45PM
Updated Dec 4th 2009 6:21PM
Wyeth (WYE) shareholders "have voted overwhelmingly" in favor of selling the company to Pfizer (PFE), according to an AP news item. The $68 billion deal made headlines in January when it was announced amidst terrible conditions in global stock and credit markets. The combined company will be the largest pharmaceutical firm in the world, with sales likely to exceed $70 billion.
Acquiring Wyeth and their stable of drugs is one way Pfizer hopes to deal with losing patent protection on several of its blockbuster drugs. When the deal was announced, Deutsche Bank (DB) analyst Barbara Ryan said that Pfizer faces 14 key patent expirations over five years, with revenues of $35 billion at risk. These include blockbuster cholesterol treatment Lipitor, the world's best selling drug, as well as Viagra.
The joining of Wyeth and Pfizer was part of a wave of mega-deals in the pharmaceutical industry, which also included a pair of deals worth more than $40 billion -- Roche fully acquiring Genentech and Merck (MRK) buying Schering-Plough (SGP).
In the case of Wyeth, Pfizer was likely attracted by the company's reach into biotech research and vaccinations. In a fact sheet issued to explain the deal, $4 billion in annual cost savings from synergies are being targeted, along with a diversification of revenue sources so that no drug represents more than 10 percent of sales. Currently, Lipitor is responsible for approximately 25 percent of Pfizer's revenues.
Commenting on the approval, Wyeth CEO Bernard Poussot said, "The merger is in the best interests of our Company and our stockholders. Combined with Pfizer, we see opportunities for increased scale where needed and resources to become the world's premier biopharmaceutical company and an industry leader in human, consumer and animal healthcare, in both disease prevention and treatment." Poussot will leave the company once the transaction is officially complete.
Wyeth shareholders will receive $33 in cash and 0.985 shares of Pfizer stock for each share of Wyeth they own. At Pfizer's current market price of $15.00 in mid-day trading, that works out to a total per-share value of $47.775; Wyeth shares currently trade just above the $46 mark, meaning that market handicappers estimate there is only a slim chance the deal could still fall apart.
James Cullen edits and writes at CollegeAnalysts.com. He is the Vice-President of the Boston College Investment Club, which owns WYE, but has no personal position in the stocks mentioned above.