Warner-Lambert and Pfizer in $90bn merger

US pharmaceutical giant Pfizer announced a deal yesterday to acquire rival Warner-Lambert for $90 billion (€92.14 billion), ending a three-month battle and creating the sector's second-largest firm globally.

The combined firm, to be named Pfizer Inc, will have annual revenues of $28 billion and a market capitalisation in excess of $230 billion, Pfizer and Warner-Lambert said in a statement.

"By combining two world-class organisations . . . we are positioned for global leadership in the discovery of new medicines that will benefit millions of patients around the world," said Mr William Steere, chairman and chief executive officer of Pfizer.

The move ends a tug-of-war pitting Pfizer against American Home Products (AHP), which confirmed that its merger plan with Warner-Lambert had been terminated and that it is receiving a $1.8 billion break-up fee.

In a statement issued yesterday, AHP said all litigation among the three companies was discontinued.

Mr Steere will lead the new company, which will be the largest US pharmaceutical firm and rank on the global market only behind the entity to be formed by Britain's Glaxo Wellcome and SmithKline Beecham.

The Pfizer and Warner boards met on Sunday to approve final terms of the deal, which requires regulatory and shareholder approval.

Under terms of the agreement, Warner-Lambert stockholders will receive 2.75 Pfizer shares for each Warner-Lambert share, valued at $98.31 per share, the companies said.

When the merger is completed, Pfizer's shareholders will own approximately 61 per cent of the new company, and Warner-Lambert shareholders 39 per cent, the companies said.

Since 1996 the two companies have co-promoted an anti-cholesterol drug called Lipitor - one of seven products in their combined offerings that each brings in about $1 billion, the statement said.

Another top-selling product is Pfizer's Viagra, the prescription medicine for erectile dysfunction. The companies also produce well-known off-the-shelf brands such as Halls cough drops and Listerine mouthwash.

The companies forecast that the new entity will have compounded three-year annual earnings growth of 25 per cent and will achieve annual cost savings of $1.6 billion by 2002.

The merged company is expected to spend $4.7 billion on research and development in 2000 and expects to have leadership positions in the areas of cardiovascular, lipid-lowering, central nervous system and infectious disease pharmaceutical developments, with 138 products under development.

Pfizer offered to purchase Warner-Lambert on November 4th for $82.4 billion shortly, after Warner-Lambert and AHP unveiled merger plans. "While we regret that we were not able to complete the transaction, we understand the decision of the Warner-Lambert board to support the alternative transaction," AHP chairman Mr John Stafford said.

It was AHP's third setback in two years after unrequited pursuit of SmithKline Beecham and Monsanto. The latter merged with Pharmacia Upjohn, to form Pharmacia Corporation.

"The termination of our agreement brings to an immediate close the distracting and acrimonious litigation," Mr Stafford said.