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** U.S. drugmaker Wyeth has withdrawn from talks to take over Dutch biotechnology firm Crucell.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

Pfizer’s at it again. The world’s largest drugmaker by revenue has set its sights on rival Wyeth and the two are talking about a deal that could be valued at more than $60 billion, according to the Wall Street Journal.

Pfizer was built in the last 10 years on two of the biggest deals in the sector — the purchase of rivals Warner Lambert and Pharmacia.

And another big deal would not come as a surprise. Some analysts and investors have made pleas to the company to make another acquisition to obtain products to prepare for an expected loss in earnings in 2011, when the patent on its flagship cholesterol drug Lipitor expires.

But a deal may not be a panacea to its problems, and Chief Executive Jeff Kindler has said so in as many words.

“Business development — whether it is a small deal, a medium-sized deal or a large deal, is an enabler for strategies. It is not a strategy in and of itself,” he told Reuters Health Summit last November.

Kindler’s strategy to deal with Lipitor’s side effects: maximizing sales of current products, jump-starting sales in emerging markets, launching new medicines and cutting costs.

Now, apparently he is adding deal-making to the list.

DEALS OF THE DAY

** French banks Credit Agricole and Societe Generale have agreed in principle to a possible merger of their asset management divisions, financial paper l’Agefi reported.

** Germany’s Siemens plans to dispose of its 34 percent stake in the nuclear power plant unit of France’s Areva, Les Echos reported.

** Spanish construction and services firm ACS has received four bids for its port assets, which could fetch between 1.2 and 1.4 billion euros ($1.56-$1.82 billion), Expansion reported.

** The European Bank of Reconstruction and Development plans investments into Hungarian banks, focusing on OTP, which does not have a foreign parent bank, the EBRD chairman told Nepszabadsag.

** French state-controlled Banque Postale could seal a liquidity deal with Dexia to allow the Belgian-French financial services group to refinance itself on financial markets, French daily Les Echos reported.

** Hannover Re is buying a life insurance portfolio of ING Groep from Scottish Re to become the fifth-biggest individual life reinsurer in the United States.

** Swiss department store Jelmoli said it had settled litigation with Tivona in a deal that will see it pay 60 million Swiss francs ($52 million) and 80,000 shares to acquire a 55.5 percent stake in the real estate firm.

(Photo: A woman walks into the Pfizer headquarters in New York in a file photo. REUTERS/Jeff Christensen)

The best seat in the house for a healthcare dealmaker has to be across the table from Elan CEO Kelly Martin. With his stock price in a coma and his two most promising drugs locked up in joint ventures, it’s hard to see what kind of bargaining power the long-time Wall Street veteran can muster to sell the Irish drug maker at a price shareholders will be happy with. Investors seem to think a deal is possible, or at least that the prospect for a deal is better than the company turning the corner on its own. They bid up the stock 16 percent on news that Elan had hired Citigroup to strategically review the company. The stock has lost nearly 70 percent since mid-July. Though the company says a sale is not its preferred strategy, this is what M&A folk tend to mean when they say strategic review.

Generally, investors have had little reason to feel confident about Elan. It is not currently making any money, a common condition for biotechs, and has $1.7 billion in debt coming due within the next five years. Though there is M&A activity in the sector, Elan is looking particularly anemic. Last month, it said it would cut 114 jobs and close its Tokyo and New York offices. With a market cap around 3.2 billion euros ($4.3 billion) it’s hardly too big for a Pfizer, Merck or Wyeth to swallow. There were rumors that Pfizer was sniffing around last week, but Elan has distanced itself from the talk.

Big pharma’s strategy of using marketing joint ventures to allow them to win big returns on successful drugs without taking on the bigger risks associated with Biotech failures has proven to be more valuable than buying biotechs outright. And many of the biotech sector’s big prospects are spoken for by way of joint venture. With the economic crisis having forced private equity to the sidelines, M&A is now a strategic buyers’ market. Elan is probably counting on a current flash of merger activity to cloud any negatives for potential buyers.

Elan’s existing big drug partners - Wyeth and Biogen - might seem like the best fits, or at least the least messy. They both have agreements allowing them to buy the drugs they co-market. But Biogen has been under pressure from none other than Carl Icahn to sell itself, so a big acquisition looks challenging. That leaves Wyeth, which said recently just last week its strong cash position could enable it to make new biotech acquisitions. If Wyeth makes a move, it should expect to get excellent terms.

Others Deals News:

* Deutsche Bank is in talks with Deutsche Post about the timing of its planned takeover of retail lender Postbank, sources with direct knowledge of the matter told Reuters.

* Royal Bank of Scotland is expected to sell up to $2.6 billion worth of shares in Beijing-controlled Bank of China as early as Tuesday, market sources said.

* BNP Paribas announced a formation of a T$2 billion ($60 million) insurance tie-up with Taiwan Cooperative Bank, aiming to tap one of Asia’s top insurance markets.

* USJ Co, which operates a Universal Studios theme park in Japan, may go private in a buyout led by Goldman Sachs, five people familiar with the matter said.

* British-based newspaper publisher Mecom is selling its German operations to Germany’s M. DuMont Schauberg for 152 million euros ($204 million) in cash, to reduce debt which has hammered the company’s stock.

* China Eastern Airlines, the weakest of the country’s three biggest airlines, wants to sell a roughly 30 percent stake in regional carrier Happy Airlines to alleviate its strapped finances, company sources said.

* Emirates Telecommunications Corp said a consortium it is part of would pay 300 million euros ($402.1 million) to acquire a mobile phone licence in Iran and was in talks to buy an operator in Iraq.

* Malaysia’s Top Glove Corp, the world’s largest producer of rubber gloves, said it is in talks with several companies for potential acquisition, but did not name any.

* Flag carrier Air China said that its parent group was starting preliminary talks on the possible acquisition of East Star Airlines, a small private carrier based in the central city of Wuhan.

* Lead managers for a deal to sell 36 percent in Hynix Semiconductor have agreed to sell the stake by a tentative deadline of September, a leading Hynix shareholder said.

* Australia and New Zealand Banking Group has lifted its stake in Indonesia’s PT Panin Bank, paying $114 million for an extra 8.4 percent, as part of its Asian growth strategy, the bank said.

(Photo: Kelly Martin, President and CEO of Elan, speaks at the Reuters Health Summit in New York November 17, 2008. REUTERS/Brendan McDermid)

Other than that, Mrs. Lincoln, did you enjoy the play?

Congress dropped a daisy cutter on the market yesterday, rejecting the $700 billion financial rescue plan and sending the stock market spiraling to its biggest one-day loss in history. But stock futures were up more than 2 percent in premarket trading.

Pundits overnight and market watchers today were laboring under the assumption that a package will ultimately reach President Bush’s desk. The process could move to the senate floor, where Treasury Secretary Henry Paulson’s plan has more support. But since House Republicans torpedoed the bill, it could face a tougher process.

In other news, Pfizer plans to drop efforts to develop medicines for heart disease, obesity and bone health as part of its plan to focus on cancer.

With the clock ticking down on its Lipitor patent, Pfizer is under pressure for the next big thing. With that in mind, talk that German drugs and chemicals group Bayer could be in its sights is not hard to swallow. Shares of Bayer, a $57 billion company, rose nearly 4 percent on the talk. It has a healthy pipeline of new drugs and an attractive over-the-counter medicines business, but it also has agro-chem and plastics businesses it might have to shed to make itself more Pfizer friendly.

In 2000, Pfizer bought Warner Lambert, picking up sole possession of Lipitor, but also acquiring Dentyne chewing gum, Schick razors and an assortment of other non-Pfizery concerns that they were forced to keep for two years as part of that deal, and - Lipitor aside - Pfizer’s share price has hardly been a stellar performer since it paid $90 billion for Warner Lambert. It’s lost half its value since a near-$39 peak in February 2004, so Pfizer shareholders focused on the next big thing could also be a bit wary of taking on a big takeover.

Bayer is a top player in insecticides, fungicides and herbicides. There are companies with the cash and interest to take on Bayer’s agro and other non-drugs chemical revenues - the businesses earned more than $20 billion in ‘07. Such companies - BASF comes to mind - would probably face anti-trust issues in acquiring these businesses from Bayer, but what’s a good strategic merger strategy without anti-trust issues.

Other deals of the day:

* UK gas producer BG Group admitted defeat in its hostile bid for Australian coal-bed methane producer Origin Energy, but analysts said BG may shift its focus to another target or become a target itself. BG said in a statement it would not increase or extend its A$15.50/share offer, which closes on Sept. 26, and said it expected the offer to lapse, after Origin formed an $8 billion joint venture with U.S. oil major ConocoPhillips.

* A top shareholder in Daewoo Shipbuilding and Marine Engineering said it had received four preliminary bids for a majority stake in the world’s No. 3 shipbuilder.

* China’s top offshore oil company, CNOOC, has taken over a refining and chemical firm in eastern Shandong, its first strong toehold in a leading regional oil market that is home to many independent Chinese refiners. CNOOC took effective control of Shenzhen-listed Shandong Haihua after the local government in Weifang city in Shandong gave CNOOC 51 percent of the parent, Shandong Haihua Group, the listed unit said in a statement to the Shenzhen Stock Exchange.

With Google looking like the big winner after doing an ad search deal with Yahoo, pretty much everyone else involved is looking like a loser. Microsoft will have to take its mammoth war chest and try to find another way to make a meaningful stab at the coveted online ad space — or concede the market altogether. Though Yahoo is waving enhanced revenue and cash flow figures around, the deal is seen as better for Google, which is the undisputed heavyweight champion in ad search and just gets a juicy space to show how mighty it is. “Google has made an enormous gain strategically. This move might well have shut Microsoft out of the online space altogether,” said Sanford Bernstein analyst Jeffrey Lindsay. Speculation is rising that the Yahoo/Google deal could provoke antitrust scrutiny, and Carl Icahn still has his troops massing to oust Jerry Yang and the Yahoo board. But if he had any clout to force Yahoo into a deal with Microsoft, it wasn’t on show yesterday. Did he lose cred, or does he plan to keep fighting? He may say soon, but probably not on his blog.

With signs that its wealthy clientele are growing nervous, UBS has wrapped up a 16 billion franc ($15.4 billion) rights issue. Flows into its wealth management business slowed to a trickle in the first three months of the year, and this is the Swiss bank’s second effort to resuscitate finances ravaged by the global markets crisis. Dieter Ewald, a fund manager at UBS shareholder Frankfurt Trust, said such concerns had prompted him recently to pare back his investment in the Swiss bank. “UBS is handicapped,” he said. “We are worried that wealth management will be hit. We want to see that the new management can bring it back on track, and then we would invest more again.”

Pfizer may bid for Ranbaxy Laboratories, countering a $4.6 billion offer by Japan’s Daiichi Sankyo for the Indian generic drug maker, the Business Standard newspaper said. Ranbaxy’s shares jumped nearly 5 percent on the report while Daiichi Sankyo’s shares dropped 2 percent. Daiichi Sankyo and Ranbaxy are seeking to become a pharmaceuticals powerhouse that sells both branded drugs and generics. The newspaper added Pfizer had held talks with the Ranbaxy founders for a possible acquisition a year earlier.

An infrastructure fund managed by Australia’s Babcock & Brown is to buy UK train leasing firm Angel Trains from Royal Bank of Scotland for 3.6 billion pounds ($7 billion) including debt. The deal came as shares in Babcock and Brown plunged for a second day on concerns about its debt and ability to raise funds but it will help Royal Bank of Scotland, Britain’s second-biggest bank, which is selling off non-core assets to further boost its balance sheet after raising 12 billion pounds ($23.5 billion) this week in the biggest ever rights issue.

Other deals of the day:

* Britain’s AEA Technology said it would buy U.S. company Project Performance Corp for $65 million and would raise 39.7 million pounds ($77.6 million) through a rights issue to help fund the deal.

* Struggling Finnish fine paper maker M-real Oyj cancelled a plan to divest its Reflex paper mill in Germany to Arjowiggins Group, citing to a condition set by the European Commission.

* India’s Jet Airways has decided to pull out of talks to buy a stake in low-cost carrier SpiceJet owing to differences over valuation, Business Standard newspaper said, citing sources from both airlines.

* A property investment arm of Morgan Stanley plans to sell at least two high-end serviced apartment projects in Shanghai, which are wholly owned by the Wall Street bank, for several billion yuan, people familiar with the situation said.

* South Korea’s National Pension Service, the world’s fifth-largest pension fund, will pump $173 million into a deal in which LS Cable has agreed to buy wire and cable maker Superior Essex.