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Pfizer (NYSE: PFE) has agreed to buy Wyeth (NYSE: WYE) for $68 billion. According to The New York Times, "The deal would not only create a pharmaceutical behemoth but would be a rarity in the current financial tumult: a big acquisition that is not a desperate merger of two banks orchestrated by the government."
A good point and one which may indicate that there is an unexpected wave of M&A coming.
Recent reports from analysts and the media say that the recession will cause huge drops in revenue in industries beyond retailing., Hotels are facing unprecedented leaves of vacancies. Many car parts suppliers are up against cash problems. Airlines are again being challenged by falling revenue as traffic dries up.
The Pfizer deal with Wyeth is more about cost cutting than it is about increasing revenue. Each company has it its own line of drugs. Putting the two companies together do not appear to do anything to improve sales, at least in the early stages. But, the firms believe that they can fire tens of thousand of people as they face having some of their drugs lose patent protection which actually could drive revenue down at the new company.
Many other industries are facing similar troubles and are facing them now. If firms in these sectors cannot sharply reduce costs, they won't be around in a year.
M&A is back, but it is back for reasons that show how ugly the economy is getting.
Douglas A> McIntyre is an editor at 24/7 Wall St.
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Reader Comments (Page 1 of 1)
1-26-2009 @ 8:10AM
Dan Barnett said...
Pfizer off 3% abt 8 EST. Clearly someone doesn't think this is a great idea.
1-26-2009 @ 8:37AM
BHarrison said...
Wait a minute . . . isn't a prmary problem with our economy the fact that too many corporations have been allowed to "become too big to allow to fail"?
Historically, we have had anti-trust laws to regulate the size of businesses to prevent monopolistic situations; but these laws have basically been ignored in the last decade or two.
What rationale is there that allows this $68 Billion merger? In the long run, such a merger certainly is NOT going to be in the best interests of society as a whole.
It is past the time that our government regulatiors (and Congress) take actions to prevent these "mega-companies" that are setting up disastrous sitautions for the future. These mega mergers are only serving the financial interests of the ultra-wealthy, and certainly not in the interests of our nation.
Hasn't Congress realized the danger that they are allowing to occur by NOT applying and enforcing the Anti-Trust Laws? The American people should be pounding on the doors of their Congressmen about these ill advised mergers.