GM Traders! Pfizer (PFE) pushes for Wyeth (WYE) merger
Posted Jan 23rd 2009 4:19AM by Douglas McIntyre
Filed under: Deals, Pfizer (PFE), Employees, Recession
Pfizer (NYSE:PFE) is pushing to buy rival Wyeth (NYSE:WYE) for $60 billion. Since this is not a particularly good time to complete M&A work, it is hard to understand why the big drug company would be considering the deal.
According to The Wall Street Journal, "A combination of these two U.S. pharmaceutical giants would redraw the boundaries of the global drug industry, which has suffered from flagging product development and high fixed costs."
Investors don't have to go far to see the motivation. The combination would allow the new entity to cut hundreds of millions if not billions of dollars in redundant costs. No matter how much risk there is in integrating the two companies, the ability to cut expenses is too big a motivation.
Welcome to the next stage of the recession and rising unemployment. Up until now most large layoffs have come from individual companies with falling sales and operating incomes. Cuts give them modest cost savings, perhaps enough to get through the recession without losing money.
But, industry consolidation is often the next shoe to drop in a failing economy. It has already happened in financial services. But, that sector is in shambles. Both Pfizer and Wyeth have been consistent money-makers. They would be benefiting from tens of thousands of job cuts in a marriage.
The economy is really bad when corporations which has been doing OK take large risk to dump staff.
Bow no head, Bend no knee. Better to rule than serve!
AI
