Wyeth deal to create global bio-pharma behemoth: Pfizer

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Not too long ago, Pfizer's chairman Jeff Kindler said big M&A is not what Pfizer exactly needs right now. But he's struck a deal that's stunned many in its size given the current environment. Will Wyeth deliver the booster dose that Pfizer will need after its patents run out in the next few years?

 

Jeffery Kindler, Chairman and CEO, Pfizer , said that Pfizer along with Wyeth would create the world's premier bio-pharmaceutical company. "We will extend our leadership in human, animal and consumer health, biologics, vaccines, small molecules, it's a great complementary fit and together we are going to create a great company."

 

A consortium of five banks has made commitments to underwrite the financing and have put together a financing package, Kindler said.

 

Kindler put all rumours saying that this merger was done as a desperate move to rest and said that the merger indeed was to enhance Pfizer's ability to meet the unmet medical needs of patients and physicians and other customers around the world.

 

Bernard Poussot, Chairman and CEO, Wyeth, believes the merger would help expand what Wyeth has been trying to build for all these years. He informed CNBC that the break up fee in case the deal does not go through would be 3%.

Here is a verbatim transcript of the exclusive interview with Bernard Poussot and Jeffery Kindler on CNBC. Also watch the accompanying video.

Q: That is such a change of tune for you, only a few months ago you were saying the big gap positions don't work in the pharmaceutical company, did u tuck in type deals or bolt on type deals, what made you change your mind here?

 

Kindler: I have always said that we would look at every opportunity. Big transactions have risks and challenges to them but we want to pursue our strategies and transactions are intended to advance our strategies. What's terrific about this deal is every single one of the strategies that we had over the last year is advanced by this transaction whether it's enhancing our inline pipeline portfolio in important disease area with unmet medical needs becoming a premium player in the biotherapedics and vaccines arena, advancing our products in emerging markets and establishing products. It's just a perfect fit with all the strategies we have identified.

 

Q: Were you able to negotiate, some kind of breakup fee here if for whatever reason this deal doesn't go through?

 

Poussot: There are usual provisions that you would expect in such transactions but we also believe that this combination can help expand what we have been trying to build at Wyeth for all these years. We are one of the first companies to go into biotech and we became the third largest biotech company in the world and we are also in prevention. We bought one of the most successful vaccines in the history and we are even offering Pfizer an opportunity to get back to the OTC business that they vacated a few years ago, so for all these reasons, there is a very good match there and also a good combination.

 

Q: So if the deal doesn't get done, how much would Wyeth get, there was a report in the New York Times saying it could be as much as USD 4.5 billion, is that accurate?

 

Poussot: That is the typical percentage breakup fees as a percentage of the transactions and nothing extraordinary and just around 3%.

 

Q: Given the current environment, were there any other suitors or did that eliminate a whole bunch of players because not everybody has the credit, the cash flow and credit that Pfizer has?

 

Poussot: Talks between the companies exist and will continue as usual. The board was extremely thorough in its evaluations of the proposal made by Pfizer and it is on that basis that we decided to avoid to this transaction.

 

Q: So can you tell us anecdotally what it was like in this environment to cobble together all the billions of dollars that you need to borrow in order to pull off this deal?  

 

Kindler: It is a very challenging environment; we have a very strong balance sheet and a very high credit rating. We were able to put together a consortium of five banks that are going to have made commitments to underwrite the financing and great work on the part of our chief financial officer teams together with the bankers have put together a very strong financing package  we are very confident on it.

 

Q: There are many analysts which agree on both of you gentlemen who say that this is a really good strategic and financial fit but there are small number of analysts out there who say this is absolutely a desperation move on your part to save your job and one analyst saying that your back is essentially against your wall because you are looking at a pattern exploration of Liptor in a couple of years and you don't have anything inside the company did, replace it?

 

Kindler: We have spent the last two years strengthening Pfizer that puts us in a position where we can do something like this. I don't think we could have done this a year or two ago. We have done a tremendous amount of work in the company and now we are in a position to transform it into a transaction that addresses everyone of the strategies that we have laid out and that meaningfully addresses that very significant challenge and in addition creates a platform for sustained and stable consistent earnings growth. Most importantly, it enhances our ability to meet the unmet medical needs of patients and physicians and other customers around the world.

 

Q: Can you give us a back-story colour, how did this all come about, there was a report that Mr. Kindler called Wyeth early last year and there were several stops and starts because of the economic and credit situation here?

 

Kindler: There are always conversations going on as people are addressing opportunities, my board and I have been reviewing potential strategies for quite some time and decided Wyeth for all the reasons was the perfect fit and no other transaction can achieve the strategic benefits that this one can and no other combination in our industry can transform in the industry the way this can and we have enormous respect for Mr. Bernard who I know since last couple of years as we both have assumed our current responsibilities and we see a lot of things and it all came together and we are all very happy about that.