Pfizer to buy rival for $60 bn

NEW YORK (CNN/Money) -- Pfizer Inc., the world's largest drug company, said Monday it has agreed to buy rival and marketing partner Pharmacia Corp. for stock valued at $60 billion.

Pharmacia shareholders will receive 1.4 shares of Pfizer for each of their own shares, which the companies said represents a 44 percent premium based on average prices over the last 30 days.

The deal doesn't include Pharmacia's remaining 84 percent holding in Monsanto, which will be spun off to Pharmacia shareholders as originally planned.

Pfizer also released second-quarter results Monday, earning $2.1 billion, or 33 cents a share, excluding special items and merger-related costs. That's up 10 percent from $1.9 billion, or 30 cents a share, it earned on the same basis a year earlier and beats the 32 cents consensus forecast of analysts surveyed by earnings tracker First Call. Revenue rose to $8 billion from $7.4 billion, missing the First Call forecast of $8.2 billion.

Pfizer reiterated that it still expects to earn $1.58 a share this year and does not expect the Pharmacia deal to hurt earnings per share next year, adding that it should add about 6 cents a share to 2004 earnings.

Pharmacia said separately it is comfortable with the consensus earnings estimates for its pharmaceutical business, as adjusted, of 39 cents per share in the second quarter and with its earlier full-year earnings guidance of $1.52-$1.57 a share.

The companies said they expect the purchase to close by year-end 2002. They estimate cost savings from the merger at $1.4 billion next year, $2.2 billion in 2004 and $2.5 billion by 2005. Details on potential staff cuts to produce the savings were not immediately released. Pfizer's current shareholders will own about 77 percent of the new company following the deal.

The companies said the combined entity should have combined revenue of $48 billion, including $39 billion in prescription sales and 12 products with more than $1 billion each in annual sales.

Many of the key products have patent protections that extend into the next decade, including Pfizer's cholesterol treatment Lipitor, which is protected through 2010, its erectile disfunction drug Viagra, protected through 2011, and Pharmacia's arthritis treatments Celebrex, which extends through 2013, and Bextra, which is protected through 2015. Pharmacia has partnered with Pfizer since 1998 on the marketing of Celebrex.

Both companies have used acquisitions to grow in the past. Pfizer bought rival Warner Lambert in 2000 in a stock deal worth $114.7 billion. Pharmacia, which started as a Sweden-based company, merged with U.S. drugmaker Upjohn in 1995 to become Pharmacia & Upjohn.

It moved its headquarters first to England and then to New Jersey in 1998. Monsanto bought the combined company in 2000 and changed its name to Pharmacia. The spinoff of the company's non-pharmaceutical business began earlier this year.

Shares of Pfizer (PFE) lost 40 cents to close Friday at $32.20, while shares of Pharmacia (PHA) gained 42 cents to $32.59.