Banks Are Lending Again, if You’re Pfizer/Wyeth

The $68 billion deal gets BofA, Barclays, Citi, Goldman, and JPMorgan lending — and could be Pfizer's high-priced cure for Lipitor dependence.

The $68-billion acquisition of Wyeth by rival drug giant Pfizer Inc. shows that some banks – at least under these unusual circumstances – are willing to lend again.

Bank of America Corp., Barclays Plc, Citigroup Inc., Goldman Sachs Group Inc., and JPMorgan Chase & Co. were reported to be financing the transaction, which had been rumored starting late last week. Pfizer’s lead financial advisors were Bank of America Merrill Lynch, Goldman, and JPMorgan. Morgan Stanley and Evercore were Wyeth’s advisors.

Financing will be through a combination of cash, debt, and stock. And the consortium of banks has provided commitments for a total of $22.5 billion in debt, the companies said.

The $50.19-a-share cash and stock deal, approved by the boards of both Pfizer and Wyeth, was widely seen as Pfizer’s medicine for what has developed as an overdependence on its blockbuster cholesterol drug: Lipitor.

The companies said that together they now will be among the most diversified companies in health care. “With its broad and diversified global product portfolio and reduced dependence on small molecules,” they said, “the new company will be positioned for improved, consistent, and stable top-line and EPS growth and sustainable shareholder value in the short and long term.” No single drug is expected to account for more than 10 percent of the combined revenues in 2012.

Terms of the deal call for each Wyeth share to be converted into the right to receive $33 in cash and 0.985-share of Pfizer common, a premium that Bloomberg News calculated at 29 percent.

The companies said that they expected the transaction to be accretive to Pfizer adjusted diluted earnings per share in the second full year after it closes. The deal is expected also to save about $4 billion in costs by the third year, especially for selling, informational and administrative functions, research and development, and manufacturing.

Pfizer directors expect to cut Pfizer’s quarterly dividend in half in the second quarter, to 16 cents a share.

A Thomson Reuters report called the deal the largest among pharma companies since 2004. Pfizer-Wyeth ranks third since 1998, it said, the report said, with Pfizer’s $88.7-billion purchase of Warner Lambert in 1999 ranking first, and the Smithline Beecham acquisition by Glaxo Wellcome right behind it at $78.8 billion.

Wyeth chairman, president and CEO Bernard Poussot said that his company’s “commitment to scientific innovation has enabled us to build a diversified biopharmaceutical company with leadership in attractive growth areas such as vaccines, nutritionals, and biologics.” He cited its development of Prevnar, a pneumonia vaccine for infants, as an example, along with Enbrel, a biotechnology product. Wyeth also makes the depression dug Effexor. “With our business focused on prevention and wellness, Wyeth is well positioned in today’s rapidly changing health care environment,” he said.

Pfizer chairman and CEO Jeffrey B. Kindler, called the combination “a powerful opportunity to transform our industry.” “The new company will be an industry leader in human, animal, and consumer health. 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.”

The deal is subject to Pfizer’s financing sources not declining to provide financing due to a material adverse change at Pfizer, or “Pfizer failing to maintain credit ratings of A2/A long-term stable/stable and A1/P1 short term affirmed,” the companies said. The said a closing is expected at the end of the third quarter or during the fourth.

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