Warner-Lambert makes overture to Procter & Gamble

Pressure on Pfizer to increase unsolicited $78 billion takeover bid

Pharmaceutical industry

January 20, 2000|By BLOOMBERG NEWS

MORRIS PLAINS, N.J. -- Warner-Lambert Co. has asked Procter & Gamble Co., the biggest U.S. maker of household goods, to consider a combination, a source familiar with the situation said yesterday.

The move could put pressure on Pfizer Inc. to boost its unsolicited $78 billion bid for the drugmaker. Warner-Lambert shares rose $4.88 to $94.88 on the New York Stock Exchange, higher than the value of Pfizer's bid.

The exploratory talks included Warner-Lambert's would-be merger partner, American Home Products Corp., the source said. The three-way combination would vault Procter & Gamble to the top ranks of the world's pharmaceutical companies. But Pfizer, the co-marketer of Warner-Lambert's top-selling cholesterol drug Lipitor, is unlikely to give up easily, analysts said.

"Pfizer will prevail, but at a higher price, at least $100 a share," said Leonard Yaffe, an analyst with Banc of America Securities. "The fact that Warner-Lambert reported a phenomenal quarter today only makes it a more valuable company."

Warner-Lambert said fourth-quarter net income rose 40 percent to $487 million, or 55 cents a share, beating analysts' estimates.

Procter & Gamble, Pfizer, Warner-Lambert and American Home all declined to comment. Procter & Gamble shares rose $1.56 to $115.38. Pfizer shares rose 50 cents to $37.

Besides Procter & Gamble, Warner-Lambert and American Home reportedly also approached Bristol-Myers Squibb Co., which wasn't interested.

Warner-Lambert last week bowed to shareholder pressure and said it would hold talks with Pfizer, moving away from the friendly merger it had planned with its New Jersey neighbor, American Home. Warner-Lambert called Pfizer's offer, valued at $92.50 a share, "better financially" than American Home's bid of $68.54.

The approach to Procter & Gamble suggests the company may be looking for another option.

Procter & Gamble, a 163-year-old maker of consumer products such as Tide detergent and Crest toothpaste, wants to expand its pharmaceutical business. Its $600 million a year in prescription drug sales is dwarfed by those of industry leaders such as Merck & Co.'s more than $15 billion.

Acquiring a company the size of Warner-Lambert would be a change in direction for Procter & Gamble, whose largest acquisition so far has been last year's $2.3 billion purchase of pet-food maker Iams Co.

The company has been reorganizing to accelerate its revenue growth to as much as 8 percent a year, triple last year's rate. P&G CEO Durk Jager, who took over a year ago, has said he sees the drug business, developed in the early 1980s as an offshoot to over-the-counter medicines such as Nyquil cold medicine and Pepto-Bismol, as a source of growth.

"New management is pushing the company to think creatively," said Mark Godfrey, analyst with Invesco Funds Group.

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