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. Last Updated: 07/27/2016

Pfizer to Pay $84Bln For Warner-Lambert

NEW YORK -- In a deal to create the world's second-largest drug company, Pfizer Inc. announced Monday it is acquiring Warner-Lambert Co. for $84.4 billion in stock.

The combined company will keep Pfizer's name and headquarters in New York, the sources said. Its medicine chest will include both impotence treatment Viagra and the blockbuster cholesterol fighting drug Lipitor.

The deal will mark the end of a takeover battle that started in November when Warner-Lambert announced a $58.3 billion merger with American Home Products Corp. and Pfizer followed with a hostile bid for Warner-Lambert.

To sever the contract between Warner-Lambert and American Home Products, Pfizer will pay American Home Products $1.8 billion - the largest breakup fee in history. American Home Products decided not to wage a lengthy and expensive court battle to stop Pfizer, according to a person involved in the deal.

American Home Products could use the windfall as a cushion against verdicts or settlements related to its part of the fen-phen diet drug combination. The company has already set aside $4.7 billion to pay claims.

Meanwhile, relations between the top executives at Pfizer and Warner-Lambert are anything but friendly.

Warner-Lambert's chairman and chief executive officer, Lodewijk de Vink, 54, will leave the company after the deal closes in four to six months, said sources, who spoke on condition of anonymity.

Pfizer also is expected to cut hundreds of jobs - most of them from Warner-Lambert. The job cuts would be part of the company's estimated $1.6 billion in cost savings by 2002.

Warner-Lambert's headquarters in Morris Plains, New Jersey, will become the base for the consumer products division, which will include household names like Listerine, Rolaids, Bain de Soleil and Visine.

Together, the two companies have sales of $29 billion, profits of $4.9 billion and a research budget of $4.7 billion. The new Pfizer will control about 6.3 percent of the world's medicine market, assuaging most antitrust concerns.

It will be the third pharmaceutical takeover in as many months: Glaxo Wellcome PLC struck a $76 billion deal to acquire SmithKline Beecham PLC to become the world's largest pharmaceutical company, and Pharmacia and Upjohn Co. announced a $27 billion merger with Monsanto Co.

Under the terms of Pfizer's deal with Warner-Lambert. Pfizer will issue 2.75 shares of its stock, worth about $98.31 based on Friday's closing price, for each share of Warner-Lambert. Warner-Lambert shareholders will own 38 percent of the combined company.