Pfizer announces plans to buy Wyeth for $68 billion; will slash 8,000 jobs

Pfizer Inc. announced in a press release that it is buying pharmaceutical competitor Wyeth for $68 billion with hopes of increasing its revenue by 50%.

Pfizer also announced that it plans to eliminate more than 8,000 jobs – approximately 10% of its work force – as it prepares for an expected revenue slide when its cholesterol drug Lipitor, which comprises one-quarter of Pfizer’s revenue, loses its patent protection in November 2011. As part of this effort, Pfizer will close a few of its manufacturing sites, although company officials have not identified which plants will be shut down.

Under the terms of the transaction, each outstanding share of Wyeth common stock will be converted into the right to receive $33 in cash and 0.985 of a share of Pfizer common stock. Pfizer stock closed at $17.19 per share on Jan. 23, according to the press release.

Pfizer manufactures Celebrex (celecoxib) and Arthrotec (diclofenac sodium) – two popular drugs used to treat osteoarthritis, rheumatoid arthritis and ankylosing spondylitis. Wyeth produces Enbrel (etanercept) for rheumatoid arthritis and ankylosing spondylitis.

Job cuts at Pfizer will begin in the first quarter and are to be completed by 2011, company spokesman Ray Kerins said in a conference call on Monday. Cuts will involve most departments, from administration in sales to manufacturing and research.

Pfizer said the cost-cutting efforts should reduce spending by nearly $3 billion, and $1 billion of those cuts will be reinvested in the business. That is in addition to an existing cost-cutting program that has produced about $2.8 billion in annual savings compared with 2006 levels, he said.

Both companies’ boards of directors approved the deal, but Wyeth shareholders must approve the agreement, antitrust regulators must review it and a consortium of banks lending the companies $22.5 billion must complete the financing. Five banks are financing the deal, including Bank of America/Merrill Lynch, Barclays, Citigroup, Goldman Sachs and J.P. Morgan Chase, according to the press release.

The Federal Trade Commission, which splits antitrust oversight with the Justice Department and typically handles pharmaceutical acquisitions, is expected to review the deal.

In the Pfizer press release, Jeffrey B. Kindler, chairman and CEO of Pfizer, said, “The combination of Pfizer and Wyeth provides a powerful opportunity to transform our industry. It will produce the world’s premier biopharmaceutical company, whose distinct blend of diversification, flexibility and scale positions it for success in a dynamic global health care environment. … With our combined biopharmaceuticals business, it will lead in primary and specialty care, as well as in small and large molecules. Its geographic presence in most of the world’s developed and developing countries will be unrivaled.”

Bernard Poussot, chairman, president and CEO of Wyeth, also said in the press release: “Wyeth and Pfizer are highly complementary business, and together we can build the best diversified health care company in the world. We believe we can better execute our strategy and can accomplish far more together in the years ahead than either company could have achieved on its own.”