Pfizer's Acquisition of Wyeth

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Case Details:

Case Code : BSTR342
Case Length : 19 Pages
Period : 2008-09
Pub Date : 2009
Teaching Note :Not Available
Organization : Pfizer Incorporated, Wyeth
Industry : Pharmaceuticals
Countries : US

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"Pfizer is in a more precarious position than most [in relation to the loss of revenue associated with Lipitor losing its patent protection], and now is certainly the right time for more deals, especially given the balance sheet power and strong cash positions of most pharmaceutical companies. The problem is that it is difficult to see too many more mega-mergers like this one. They haven't generally worked in the past and there is certainly no reason to think that they will now."¹

- Chris Stirling, Head of Chemicals and Pharmaceuticals, KPMG², Europe, in January 2009.

"Pfizer is in the most desperate state of anyone in the industry in terms of patent expirations. We feel that it is in the best interests of Pfizer to do a deal like this in order to shore up the top line."³

- Herman Saftlas, Analyst, Standard & Poor⁴, in January 2009.

Introduction

On January 26, 2009, US-based pharmaceutical major Pfizer Incorporated (Pfizer) and one of its rival firms, US-based Wyeth, announced that they had entered into a merger agreement. The merger would make Pfizer the world's largest biopharmaceutical company. As per the agreement, Pfizer would acquire Wyeth in a cash-and-stock transaction. Pfizer agreed to pay a total of US$ 50.19 per share of Wyeth making the total deal worth approximately US$ 68 billion. The transaction between Pfizer and Wyeth would result in Wyeth stockholders holding a 16% equity stake in the combined entity in addition to the cash they would receive from Pfizer.

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1] "Obama Battles Big Pharma," www.independent.co.uk, January 27, 2009.
2] Founded in 1987, KPMG is one of the largest professional services firm in the world. KPMG had three lines of services - audit, tax and advisory. It had presence in 144 countries by 2008. KPMG reported US$ 22.7 billion revenue for year ended September 30, 2008.
3] Catherine Arnst, "A Pfizer-Wyeth Merger Isn't the Cure All," www.businessweek.com, January 24, 2009.
4] Standard & Poor is a division of McGraw Hill, US that publishes financial research analysis on stocks and bonds.

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