Fall in Pfizer Stock Shaves Bid on Warner-Lambert

A slide in Pfizer Inc.’s stock Friday shaved billions of dollars off its hostile bid for Warner-Lambert Co. as American Home Products Corp. stood by its agreement to combine with Warner-Lambert.

Pfizer’s shares fell $2.50 to $34.75 as the most active issue on the New York Stock Exchange as investors worried about the price the company would be willing to pay for Warner-Lambert. The all-stock offer, originally worth $82.4 billion when it was unveiled Thursday, had tumbled to $74 billion by the time markets closed Friday.

American Home Products issued a statement saying the Pfizer bid would not prevent it from moving forward with its merger agreement with Warner-Lambert.

“Pfizer’s conditional offer for Warner-Lambert is illusory and not capable of being completed,” John R. Stafford, chairman and chief executive of American Home, said in a statement.

The proposed American Home Products merger with Warner-Lambert was worth $71 billion when it was announced early Thursday and was valued at $70 billion Friday. Both are based in New Jersey. Shares of American Home ended unchanged Friday at $55 on the NYSE, where Warner-Lambert dipped 6 cents to $89.94.

Pfizer continued to defend its bid as “a very compelling offer to the shareholders of Warner-Lambert.”

New York-based Pfizer told Reuters it was “very committed” to pursuing a deal with Warner-Lambert, but said it was too early to discuss possible hostile measures. Pfizer Chief Financial Officer David Shedlarz said, “We think this is an excellent deal for both companies and should be aggressively pursued on that basis.”

Asked whether Pfizer would pursue hostile measures, such as launching an exchange offer or a consent solicitation to remove Warner-Lambert’s board of directors, Shedlarz said: “It’s too early to respond to that.”

Warner-Lambert’s board of directors met late Thursday to discuss the Pfizer bid, and decided that the agreement with American Home Products remained “in the best long-term interests of our shareholders, colleagues and the communities in which we live and work.”

The prize in the bidding war is the creation of the world’s biggest drug maker with a product lineup led by Lipitor, the top-selling cholesterol drug made by Warner-Lambert. The company also makes products like Trident gum and Sudafed, but Lipitor accounts for one-quarter of Warner-Lambert’s sales.

Pfizer, known for its impotence-treatment drug Viagra, has an agreement to co-market Lipitor with Warner-Lambert.

American Home makes the hormone replacement drug Premarin, as well as Advil and Chapstick and other health-care products.

One obstacle to Pfizer is an agreement between Warner-Lambert and American Home Products that would provide a $2-billion break-off payment to the company left at the altar if the other partner walks away from the deal.

Pfizer has filed a lawsuit challenging the fee agreement and another provision that would allow American Home to buy 14.9% of Warner-Lambert’s stock if Warner-Lambert bows out of a merger.

Another wrinkle in the deal is more personal.

If a merger with American Home Products goes through, Warner-Lambert’s chairman and chief executive officer, Lodewijk J.R. de Vink, will be the chief executive officer and eventually chairman of the combined company, which would be called AmericanWarner. His future at Pfizer is less certain.

Pfizer’s chairman, William Steere Jr., now has to decide how to sway De Vink to his side, perhaps through a sweeter offer, or seek to remove him and the rest of the Warner-Lambert board through a proxy fight.

Pride may also be motivating Stafford, who has tried three times in the past two years to find a merger for American Home Products. His company has been struggling to overcome legal troubles and safety concerns about some of its products, and at age 64, he is running out of time to restore his legacy.