THE job of the drug industry is to provide relief from ailments, and it usually does so with its medicines. The news on Monday January 26th that Pfizer, the world’s biggest drugmaker, is bidding for Wyeth, a large American rival, should provide a welcome tonic for some. The legion of lawyers and bankers who specialise in mergers and acquisitions, for example, may at last have something to do. Pfizer is offering $68 billion for its rival, belying the current economic gloom. The financial crisis and recession have put a brake on most deals, other than mergers between crumbling banks, as credit has dried up and confidence has shrivelled.
The giant American drug company will finance the deal with a mixture of its shares, which have held up reasonably well as markets have dived, cash from reserves and bank loans. Pharmaceutical companies are in a happier position than firms in other industries. They are known for large and reliable cashflows, even when economic misery is growing. Otherwise nervous bankers should not be too fearful of extending credit to Pfizer. Full Story.