DealZone

A trigger for more drug deals?

January 26, 2009

Jeff KindlerPfizer has taken the plunge, and others may follow.

The world’s largest drug maker is buying rival Wyeth for $68 billion in cash and stock to become even larger.  

Pfizer’s Jeff Kindler is content with swallowing Wyeth for now. He told CNBC the company has no plans to do any huge transactions in the near future.

But the merger could trigger a wave of consolidation in the cash-rich sector as big pharma looks to diversify revenues in the face of competition from generic-drug rivals, analysts say.

The deal helps Pfizer cope with a major gap in revenue in 2011, when its blockbuster Lipitor cholesterol treatment will begin to face U.S. generic competition. It will also help it diversify into vaccines and injectable biologic medicines by adding Wyeth’s big-selling Prevnar vaccine for childhood infections and Enbrel rheumatoid arthritis treatment.

Pfizer would also realize major cost savings by streamlining areas that overlap.

Still the stakes are huge. Pfizer is taking on $22.5 billion of debt from a consortium of banks and cutting its dividend.

And the deal, which has a material adverse change clause, could falter if lenders lose confidence in Pfizer’s health. The transaction is expected to close at the end of the third quarter or during the fourth quarter.

DEALS OF THE DAY

** South Africa’s biggest consumer goods group, Tiger Brands, made a new approach to AVI about a potential offer for the company, and its smaller rival is considering the proposal.

** Norwegian gas shipper BW Gas Limited said it has agreed to buy four liquefied natural gas carriers from World Nordic SE for $720 million and will pay for the vessels by issuing new shares.

** Japanese soy sauce maker Kikkoman said U.S. drinks maker Coca-Cola Co was seeking a 50 percent stake in an unlisted Kikkoman subsidiary, Tone Coca-Cola Bottling Co.

** Danish insurer TrygVesta said it was in talks to buy small Swedish insurer Moderna.    

** Austrian steelmaker Voestalpine is eyeing two possible purchases of railway systems makers in the United States, Austrian newspaper WirtschaftsBlatt reported.

** U.S. drugmaker Wyeth has withdrawn from talks to take over Dutch biotechnology firm Crucell.

** Turkey’s Finansbank, a unit of Greece’s largest lender National Bank, said it had decided to sell its Malta subsidiary to another unit of NBG for 185 million euros ($240 million).

** Coal miner Polo Resources said it received an unsolicited offer approach from a private equity firm.

(Photo: Pfizer Chief Executive Jeff Kindler. REUTERS/Brendan McDermid)

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