Can a $68B Wyeth deal save Pfizer?

It's official: Pfizer has agreed to buy Wyeth in a $68 billion deal. The cash-and-stock transaction will amount to $50.18 per share and will be financed in part by $22.5 billion in debt provided by a consortium of banks, including Goldman Sachs, JPMorgan Chase, Citigroup and Bank of America (a big deal in the present credit environment, but that's another story). Current Pfizer shareholders will also pitch in; the company is cutting its quarterly dividend to 16 cents per share.

Already, there's plenty of commentary on the deal, ranging from hopeful (Pfizer CEO Jeff Kindler) to skeptical (The Wall Street Journal's Heard on the Street) to downright negative (Derek Lowe at The Atlantic). According to Kindler (photo), "The combination of Pfizer and Wyeth provides a powerful opportunity to transform our industry. It will produce [a] distinct blend of diversification, flexibility, and scale" that positions the combo company for success," his statement said.

John Jannarone's Heard on the Street column is blunt about the deal's shortcomings. "[I]t doesn't solve the drug giant's underlining problem: It still is struggling to develop new blockbuster drugs in-house," Jannarone writes. But he acknowledges that buying Wyeth would diversify Pfizer's portfolio and help fill the hole left when cholesterol giant Lipitor goes off patent. Plus, it could help eliminate up to $2.3 billion in expenses.

Meanwhile, Lowe takes a dim view of Pfizer-Wyeth's prospects (or should we say Wy-Pfi, or Wyzer?). The company doesn't have a great record on its past acquisitions, he says. And two plus two in research often equals two, not five. "[T]he fear, among scientists like me, is that Pfizer is going to take another productive research organization, raid it for what it considers to be of immediate value, fire a lot of people, and then take the rest and do whatever it is they do to them to Pfizerize their productivity," Lowe writes. The only people who should be happy about this deal, he claims, are the companies that didn't attract Pfizer's acquisitional eye.

- see the Pfizer press release
- read the story in the New York Times
- check out the WSJ column
- get Lowe's take in The Atlantic

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