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Pfizer, W-L spar again
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November 23, 1999: 6:48 p.m. ET
Pfizer sues claiming pact violation; Warner says Pfizer misunderstood terms
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NEW YORK (CNNfn) - Pfizer Inc. filed a new lawsuit Tuesday against takeover target Warner-Lambert Co., claiming it violated a joint marketing pact on a hot new drug, while Warner-Lambert said Pfizer misunderstands the pact's terms.
The latest verbal sparring may be a preview of a scheduled court proceeding set for early next year that could determine whether Warner-Lambert falls victim to Pfizer's unsolicited $77.8 billion bid or completes a friendly $67.1 billion merger with American Home Products Corp.
Pfizer launched its surprise offer to wrest control over Warner-Lambert just hours after the American Home deal was announced earlier this month. Now, the battle has moved to Delaware Chancery Court.
In its second suit to stop the American Home merger, filed on Tuesday, Pfizer charged Warner-Lambert violated terms of their joint marketing pact for the blockbuster cholesterol drug Lipitor, seen as perhaps the crown jewel at Warner-Lambert. Pfizer also said AHP illegally interfered with the pact.
Pfizer said the agreement barred it from trying to buy Warner-Lambert until a third-party bidder first made a bid for Warner-Lambert. As a result, Pfizer believed it was acting within the terms of the accord when it launched its unsolicited bid.
But Warner-Lambert, in a response Tuesday after its regularly scheduled board meeting, insisted the pact's terms allow Pfizer to make an offer only if an outside bidder made an offer first. Warner-Lambert, in its reply, insists the American Home deal is a "merger of equals" - not a takeover or buyout.
In a statement, Warner-Lambert said: "Pfizer continues to rush to the courthouse for relief but persists in failing to present the true underlying facts or cogent claims."
Pfizer also charges Warner-Lambert executives violated the accord by misleading Pfizer about the American Home talks and did not give shareholders a right to consider Pfizer's higher offer.
Warner-Lambert, which makes Lipitor, said it is continuing to review whether it will try to take back the accord with Pfizer, whose marketing prowess is one of the factors analysts have cited for the drug's tremendous success.
Lipitor's success has thrust Warner-Lambert, of Morris Plains, N.J., into the top tier of drug makers after years as a low-profile maker of personal care products and candy. Pfizer, maker of the popular male impotence remedy Viagra, is the fourth-largest U.S. drug maker in terms of sales, according to the Fortune 500 rankings. American Home is ranked fifth and Warner-Lambert is seventh.
Pfizer said that it does not seek to change the ongoing marketing arrangement for Lipitor. The drug has current annual revenue of about $4 billion and is considered one of the most successful new drugs in history.
"The Lipitor partnership is a very valuable asset for both companies and their respective shareholders," Lou Clemente, Pfizer executive vice president, said in the statement.
A lengthy battle
Herman Saftlas, a pharmaceutical analyst at S&P Equity Group, said Pfizer's latest move is a tactical maneuver in what is shaping up to be a drawn-out takeover battle.
"All this legal maneuvering is just ongoing positioning," Saftlas said. "The lawyers are going to make a fortune here - that's for sure."
Last week, the court set a Jan. 24 date to hear Pfizer's first lawsuit filed earlier this month. That suit seeks to remove a $2 billion breakup fee and an accounting obstacle that are included in the terms of the American Home merger.
Pfizer has made its bid contingent on winning in court, because unless it prevails a takeover would be much more costly - forcing Pfizer to swallow as much as $80 billion in goodwill.
Warner-Lambert shareholders are slated to vote on the American Home deal May 15. Under terms of the deal, shareholders must have their say on the merger before Warner-Lambert could decide to scuttle the arrangement and accept a higher offer.
In Tuesday trading, shares of New York-based Pfizer (PFE) rose 1-1/4 to 36-1/4, while Morris Plains, N.J.-based Warner-Lambert (WLA) shed 15/16 to 88-3/8; American Home (AHP), based in Madison, N.J., lost 1-3/8 to 53-52-3/8.
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