THE ACQUISITION OF WYETH BY PFIZER
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FINANCIAL TERMS
Pfizer acquired Wyeth for $ 68 bn.
Purchase Price
• Acquire all outstanding Wyeth common shares• Valuted at $50.19 per share
Cash /Share Mix
• $33 per share in cash• Value of $17.19 per share in equity
Ownership• Pfizer shareholders will own approximately
84% of the stock in the combined company
Funding • Combination of cash, debt, and equity
SourcesDebt $ 22.5 Billion
Cash 22.5 Billion
Pfizer Stock 23.0 Billion
Total $ 68.0 Billion
Commitment from syndicate of banks for debt financing :
Goldman Sachs JPMorgan Barclays Citigroup
Bank of America Merrill Lynch
TRANSACTION FUNDING
STOCK PRICES BEFORE THE MERGER
29% premiu
m$50.19
Love and other drugs_clip1.mp4
Lover and other drugs_clip 2.mp4
Wyeth Origin.pdf
PFIZER’S ACQUISITION MOTIVATIONS
- Largest acquisition since the 2008 financial crisis. Why risk it?
- Pfizer’s massive success due largely to two patent-protected products.
- Lipitor patent expiring in 2011. $12bn/year revenue.
- Viagra’s patent expiring from 2010-2013. $5bn/year revenue.
- Effects of this massive (20%) revenue loss?
ACQUISITION MOTIVATIONS CONTINUED
- Pfizer’s blockbuster drugs now a threat to their balance sheet and common stock price.
- How to compensate? R&D for new products? Increased marketing for existing products?
- Management realized that reliance on sales of a single product might actually be a weakness.
- Solution must diversify portfolio and play to Pfizer’s strengths.
UPCOMING PATENT EXPIRATIONS
Lipitor: patent expired 2011
Lyrica: patent expiring 2013
Celebrex: patent expiring 2014
WHY WYETH – HORIZONTAL BOUNDARIES- Pfizer’s product portfolio is almost completely
traditional pharmaceutical products.
- Wyeth specializes in high-margin biologics, nutraceuticals, and vaccines.
- Very little overlap between their respective portfolios.
- Difficulty in reproducing a biologics manufacturing process means patent expiration isn’t a significant problem.
Before the merger After the merger
ECONOMIES OF SCOPE / MARKETING ELASTICITY- Wyeth’s products can be sold through Pfizer’s
excellent pre-existing sales and marketing infrastructure.
- Industry Analyst “For example, Lipitor, had it been in the hands of Warner-Lambert, would have probably been a $5 billion product. With Pfizer, it was $13 billion. I think they’ll do the same thing with Wyeth products.”
- Pfizer’s brand increases the marketing elasticity of Wyeth’s products.
DISCUSS QUESTION
Based on the information we presented so far, do you think it was a good acquisition for Pfizer?
CONCLUSION
CONCLUSION
unit: USD million
CONCLUSION
Thanks!
Our Question
Do you think it was a good acquisition for Pfizer?
On Oct. 15, 2009 Pfizer acquired Wyeth for $ 68 bn.
