M&A

Drug Bust: Calling Off Deal Would Cost Pfizer, Wyeth Plenty

Pfizer would have to pay $4.5 billion to pull out; Wyeth at least $1.5 billion.
Stephen TaubJanuary 30, 2009

If Pfizer does not complete its takeover of Wyeth, valued at $68 billion at the time of the merger announcement, one of the two drug companies will be on the hook for a hefty breakup fee.

According to regulatory filings, if Pfizer calls off the deal even if all conditions are satisfied, it must pay Wyeth $4.5 billion. If Wyeth halts the deal within 30 days of the merger agreement, it will owe $1.5 billion, and if it does so after that, the termination fee will be $2 billion.

Wyeth also would have to pay Pfizer $2 billion if the merger is terminated if Wyeth’s shareholders don’t approve it, or if it enters into a third-party agreement regarding certain “extraordinary transactions” within 12 months following termination.

In addition, if as a result of an “intervening event” Wyeth’s board of directors changes its recommendation that shareholders approve the merger, then the company may terminate the deal. In that case, Wyeth would pay Pfizer a $2 billion termination fee and reimburse up to $700 million of expenses.