Johnson & Johnson to acquire Pfizer Consumer Healthcare for $16.6 billion in cash

By E. Janene Geiss and Jennifer Lanning Drey

Philadelphia, June 26 - Johnson & Johnson said Monday it has agreed to acquire Pfizer Consumer Healthcare for $16.6 billion in cash.

The Johnson & Johnson board of directors approved the transaction, which is expected to close by year-end, according to a company news release.

Pfizer said it intends to use the after-tax proceeds of about $13.5 billion to invest in new products and technologies and enhance shareholder returns.

Pfizer said it expects that during 2006 and 2007 it will purchase up to $17 billion of the company's common stock. This includes up to $7 billion in 2006 and up to $10 billion in 2007 and reflects an increase in the company's share purchase authorization from $5 billion in June 2005 to $18 billion, which has been approved by Pfizer's board of directors.

As a result of its expanded share purchase activity, Pfizer said it expects the consumer health care divestiture to be non-dilutive to earnings in 2007 and accretive in 2008.

Pfizer's global business of personal care and over-the-counter products achieved sales of $3.9 billion in 2005.

'Exceptional portfolio'

"Our agreement to acquire Pfizer Consumer Health Care is a natural part of our longstanding strategy of leadership within attractive health care markets. Pfizer Consumer Healthcare provides an exceptional portfolio of growing, iconic health care brands," said William Weldon, chief executive officer of Johnson & Johnson, in a company conference call on Monday.

Following the integration of Pfizer Consumer Healthcare, Johnson & Johnson's portfolio will be comprised of approximately 40% pharmaceuticals, 35% medical devices and diagnostics and 20% consumer products, Weldon said.

Johnson & Johnson believes the acquisition will improve its position in global consumer health care and over-the-counter markets, which will be important contributors to its future growth, Weldon said.

"The use of [over-the-counter] medicines is growing rapidly in both mature and emerging markets as consumers take greater responsibility for their health care decision-making and look for ways to control costs. Increased disposable income in developing nations is also helping drive increased demand for consumer health products," Weldon said during the call.

Includes Listerine, Nicorette

Pfizer Consumer Healthcare's worldwide market-leading brands include Listerine oral care products and the Nicorette line of smoking cessation treatments.

Other brands include Lubriderm, Visine, Neosporin, Sudafed, Zantac and Benadryl.

The Pfizer Consumer Healthcare business adds a diverse portfolio of brands that provide Johnson & Johnson with leadership positions in nine additional categories, including large new segments such as smoking cessation and mouthwash.

The addition of Listerine transforms Johnson & Johnson's oral health care business by more than tripling it into a franchise well in excess of $1 billion, officials said.

It further expands the franchise presence in more than 60 markets.

"It will broaden the oral care franchise beyond flosses, brushes and whitening products and will help strengthen our relationships with leaders in the dental and medical communities," said Collen Goggins, worldwide chairman of Johnson & Johnson's consumer and personal care group.

Under the agreement, Johnson & Johnson said it also will acquire the U.S. over-the-counter switch rights to Zyrtec, Pfizer's once-a-day, non-sedating prescription antihistamine, upon patent expiration.

"Pfizer Consumer Healthcare will give us access to new categories and compliment our position in a number of existing categories," said Goggins.

Officials said the acquisition is expected to be accretive to Johnson & Johnson's earnings per share on a cash basis in 2009.

The integration will provide significant opportunities to leverage the sales, administration and supply chain of both organizations, officials said.

Pfizer is a New York pharmaceutical and consumer health care products company.

Johnson & Johnson is a New Brunswick, N.J., pharmaceutical and health care products company.

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