One Prescription Too Many (Breakfast News) November 5, 1999


Friday, November 5, 1999

"I was expecting this, but not so soon."
-- Tombstone inscription, Boot Hill, Arizona.

One Prescription Too Many

By Richard McCaffery (TMF Gibson)

Pharmaceutical company Warner-Lambert's (NYSE: WLA) board of directors last night decided to stick to its guns and proceed with the $72 billion merger agreement reached yesterday with American Home Products (NYSE: AHP).

The deal, the largest in the history of the pharmaceutical industry, will create the world's largest pharmaceutical company, a giant called AmericanWarner Inc. with $26 billion in annual sales, a $3 billion research and development budget, and a market value of nearly $145 billion.

Products sold by the combined companies include Advil, Listerine, Robitussin, and the cholesterol-busting sensation Lipitor, which rings up more than $3 billion in annual sales.

As one door opens, however, another closes. Warner-Lambert is walking away from an $82.4 billion hostile bid proposed by drug giant Pfizer (NYSE: PFE) shortly after yesterday's announcement, a deal that values Warner-Lambert at a 30% premium to last month's average closing price.

Pfizer, which has had great success helping Warner-Lambert market Lipitor, has been trying to arrange a business combination for several weeks, according to a letter sent to Warner-Lambert by William Steere, Pfizer's chairman and chief executive.

Warner-Lambert issued a statement in response to the Pfizer bid saying its deal with American Home -- a merger of equals under which Lodewijk de Vink, Warner-Lambert's chairman, president, and chief executive, will become CEO of AmericanWarner -- is in shareholders' best interests.

In addition, language in the Pfizer bid made its offer contingent on the elimination of a breakup fee contained in the Warner-Lambert/American Home agreement, a clause that could force Warner-Lambert to pay a $2 billion settlement if it walked away from the American Home deal.

Is that it? Not quite. Pfizer filed suit in Delaware protesting the breakup fee, and, of course, Warner-Lambert's decision to go with American Home led to a flurry of suits from shareholders claiming that the Pfizer deal should get the nod.

News to Go

Entertainment and media giant Disney (NYSE: DIS) reported that net income (excluding restructuring charges) for the fiscal fourth quarter fell 37% to $212 million, or $0.10 per diluted share, as revenue declined and costs continued to be a problem. The company expects hard times to continue at least through the first half of fiscal 2000.

Soft drink bottling company Coca-Cola Bottling (Nasdaq: COKE) announced plans to take a fourth-quarter after-tax restructuring charge of up to $3 million that involves layoffs for as many as 300 people, or 4% of the company's workforce.

Automotive sales, maintenance, services, and financing company Sonic Automotive (NYSE: SAH) plans to spend up to $25 million buying back shares of stock. The company, which will soon operate 159 franchises and 30 collision repair centers, is the country's second-largest automotive retailer.

Furniture rental company Cort Business Services (NYSE: CBZ) and partner Bruckmann, Rosser, Sherrill & Co. have canceled an agreement under which an investment group would have purchased Cort for $28 per share. The deal was terminated from lack of shareholder support and weakness in the high-yield debt market.

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