Financial Collapse RSS

Jan 27, 2009

Pfizer to cut 19,000 jobs as it confirms Wyeth deal

US drugs company Pfizer confirmed it is buying rival Wyeth for $68bn (£50bn), as it announced more than 19,000 job cuts.

The two companies employ about 6,500 people in the UK. Pfizer expects to cut the combined global workforce of 130,000 people by 15pc. This includes plans to cut its own workforce by 10pc.

Pfizer chief executive Jeff Kindler said the job cuts were "difficult and painful but very necessary" owing to a slowdown in sales. The company yesterday reported plunging fourth-quarter profits, hit by a $2.3bn legal charge.

Pfizer has been under pressure to do a deal as it faces a patent "cliff" in 2011, when it loses its exclusive right to produce cholesterol drug Lipitor.

Lipitor is the world's top-selling medicine and is worth almost a quarter of Pfizer's total sales. Mr Kindler said the Wyeth acquisition "definitively" addresses the looming patent expiry.

The tie-up is the largest pharmaceutical deal in nearly a decade and will increase Pfizer's revenue by 50pc, strengthen its number one position in the troubled industry, and transform it from a pure pharmaceutical company into a diversified healthcare giant. The cash-and-shares deal values Wyeth at $50.19 a share, a 15pc premium to its closing price last Friday.

Pfizer has raised $22.5bn of debt from a consortium of banks to help fund the acquisition, which will be paid for in a mixture of cash, debt and shares. Pfizer said it would cut its dividend by half to 16 cents a share to save money for the deal.

Wyeth shareholders will be offered $33, plus just under one share in Pfizer, for each of their shares. Although the boards of both companies have approved the deal it still faces several hurdles: Wyeth shareholders must vote it through; anti-trust regulators have to review it; and Goldman Sachs, Bank of America, JPMorgan, Barclays and Citigroup must complete the financing.

Shortly after announcing the deal, Pfizer unveiled a 90pc slump in fourth-quarter net profits to $266m, after a legal settlement over allegations it marketed drugs to address illnesses they were not approved for. Net profits for the year stayed broadly the same as for 2007 at $8bn on revenues unchanged at $48bn.

Pfizer expects the tie-up to create $4bn in cost savings by the end of 2012. The deal should add to Pfizer's earnings per share in the second full year after closing.

Pfizer chief financial officer Frank D'Amelio said the combined entity would achieve revenues of $70bn by 2012 – the sum of both companies' revenues in 2008.

Wyeth chief executive Bernard Poussot will continue to run Wyeth until the deal completes, and may have a role in the enlarged group.

Pfizer, which employs 5,000 people in the UK, has its European R&D headquarters at Sandwich in Kent, and its UK business headquarters in Surrey. Wyeth employs 1,500 UK staff across sites in Berkshire and Hampshire.

Pfizer shares dropped $1.48 to $15.97, while Wyeth picked up $0.30 to $44.04, in early trade.

Source : Telegraph
[tags : ]


Related Posts with Thumbnails