Stiffed: Why Are Bailed-Out Banks Helping Pfizer Buy Wyeth?
Are U.S. taxpayers getting stiffed? Pfizer, Viagra's daddy, is using money from taxpayer-bailed-out banks to help buy major pharmaceutical competitor Wyeth in a $68 billion deal. That won't help taxpayers or consumers. Nor is it designed to. It will harm the companies' workers, 20,000 of whom will likely be laid off. It's even likely to hurt small bio-tech companies, drying up potential sources of capital and leaving fewer potential major investors or purchasers.
The deal may be good for Pfizer, helping the company recover from a $2.3 billion legal settlement over misleading marketing on the pain reliever Bextra, and helping them amplify the clout of the $3 million they recently spent lobbying against the right to import cheaper drugs from Canada. But it won't help the rest of us.
So why are banks bailed out with taxpayer dollars furnishing the $22.5 billion of debt financing for this deal? On NPR, a financial analyst crowed about how wonderful it was that major banks were lending this kind of money in the current economy. But it troubles me that among the deal's prime financial backers--Bank of America/Merrill Lynch, Barclays, Citigroup, Goldman Sachs and J.P. Morgan/Chase--all but the British-owned Barclays received money from the Congressional bailout. So the funds they lent to this merger won't be available to help smaller (or larger) companies keep their doors open producing and selling products--ideally ones that actually benefit society--and not just to consolidate control over their industry. This seems one more case of public subsidies for private gain.
I'm no economist. For all I know, maybe in some Henry Paulson-Alan Greenspan dream world this will end up boosting America's physical and fiscal health. Perhaps the new combined entity will come up with some miracle drug that neither company would have created on their own. But mostly, it seems just one more example of how a bailout without strong government control, or even oversight, just feeds the same greed-driven abuses that have gotten us into our current predicament. It's going to take more than Viagra to strengthen our economy once more.
Paul Rogat Loeb is the author of The Impossible Will Take a Little While: A Citizen's Guide to Hope in a Time of Fear, named the #3 political book of 2004 by the History Channel and the American Book Association. His previous books include Soul of a Citizen: Living with Conviction in a Cynical Time. See www.paulloeb.org To receive his articles directly email sympa@lists.onenw.org with the subject line: subscribe paulloeb-articles
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Over-medicated as we are, I'd agree that some of the drugs that Big Pharma produces have genuine value. And yes, as some of the commentators have said, this is a regular business transaction of the kind that banks expect to fund.
But I see no argument that it stimulates our economy (so to speak) and it disturbs me that money that was supposed to restore badly needed economic liquidity is instead going toward more market consolidation.
One can argue what the money we gave the banks was "meant to do". I, personally, saw it as a technical tool to keep many of them from going bankrupt for simple accounting reasons.
So we gave banks a check and a handshake, hoping that they would use the money wisely. Now, it's not clear that they always have. There is no guarantee that they will in the future. It is pretty much a done deal that we won't see most of this money ever again.
Now, in turns of M&A, the opinion I have heard from managers of publicly traded companies is that M&A rarely makes sense for the companies. In this case the M&A will do nothing to solve the real problems of both companies. But what they also told me about M&A is this: the banks always win. It's one of those golden opportunities to extract money from the market at almost no risk.
So if we have to ask ourselves if this is a good or lousy "investment" of our money, it might just fall into the first category. No, it will not stimulate the economy, but it might just prevent us from having to save a bank or two another time.
Statistical data does supports KTM's proposition that M&A deals "on average" do not work out . But that statement is very general. let me dig a bit in further.
When we say M&A deals do not work out on average, we mean for the Acquirer, NOT the target. It works out fine for the target a lot more.
REASON: Projected "synergy" is most often overstated and hence the premium paid to target doesn't justify the deal.
Now, without statistical backup and just from following markets i can tell you which industries do worse with M&A than stand alone entities. Media is one of them. Reason is i believe "culture differences". Very few mergers have provided the benefits that were pitched to shareholders.
Now i believe in two industries mergers have worked exceptionally well. One is Integrated Oil & Gas industry and the other is Pharmaceuticals.
Exxon Mobil, Chevron Texaco, BP-Arco-Amoco, Conoco-Phillips...each one and i mean each and every one has been a sucessful merger leading to a lot of cost savings and generation of wealth.
I have read that pharma mergers do tend to do ok but have no examples in hand.
as of media not doing well, dont go further than AOL time warner and CBS viacom !!
The Bankers take our Money. They give it directly to those least in need of it--Mega Corporations, in this case, one that makes its blood money off of drugs sold here in America for 2-3 times what the rest of the world pays for them.
That money was intended to "trickle down" into the hands of the people who would put it back into the system by purchasing gasoline, food, paying their mortgages, and starting new small businesses that employ other working people--You know, working people, the engine if our economy.
They do all this, now, in plain sight as there is no culture of shame left since Bush ripped the guts out of personal responsibility or accountability. They trade our money back and forth between them, and they may as well be trading lives. In fact, they are.
Pfizer makes most of its money with drugs that people want, not with drugs that people need. And therein lies their problem... all the patents for those are running out. If you feel exploited by the price of Viagra, don't use it. You can get the same, if not better results than from Lipitor by eating right.
No sure why you feel compelled to mix banking with the "trickle down" slogan of the Republicans. All the money people got for their home loans went through banks. It didn't just trickle, but it rained gold for a decade. And that was the problem. People borrowed because we let them.They borrowed more than they could afford. So now the system has a hangover, not because somebody stopped the money from going to the people but because nobody put a halt to giving it to millions of individuals who did not have the necessary knowledge of how to deal with it.
You know Rule, the other day you said something really deep. Today you are kind of back to hitting everything in your reach indiscriminately. It's not helping your cause.
The banks should not be using OUR MONEY, that was provided through the bail out process, to fund Mergers and Acquisitions by the Corporatocracy. I don't care if its drug companies or if it's chewing gum. They want to buy up companies during this manufactured down turn, let them finance their purchases through bonds or stock offerings. Not with my money.
Period.
I continue our little discussions because occasionally there is a spark of understanding on your part regarding who the real accountable villains in this economic disaster are, and that gives me hope for you. Then you revert to type, arrogant and supercillious and judgmental of those you believe to be on the social rungs beneath you.
If Pfizer has so much faith in this competition destroying merger, they should raise money for it the old fashioned way--in the "free market" and get it from the sale of stock or through VC companies who would require massive due dilligence. They'd rather feed at the public trough though, using easy money provided to the banks by Us! Talk about raining gold!!!
This one is not even about exploiting people. You think the money Pfizer makes with men who want to be "stronger" does not also go into the R&D of drugs for which there is a real need by people who are suffering? Or do you really think we would have any of these drugs if there was no money to be made with them? If you think that, I have to disappoint you with reality. I even have a witness: a friend of mine suffers from a disease that is so rare that nobody, not even the government, wants to spend any money on it. You could ask her what she thinks about the prospects of a "non-profit drug development process". But you might have to duck because she might just throw something at you.
Yes I know exactly what you are saying KTM. Only if a drug is profitable then only R&D will be done on it. If there is no "market" for drugs, there wont be any "attempt" to invent a drug for it. its that simple...
This is the umpteenth M&A for Pfizer, and the earlier ones did not work. We all know the saying about doing the same thing and expecting a different result. There is nothing wrong in making money; it is just that currently, it happens to be legalized theivery by the top. Mergers make companies less innovative and end up firing the best scientists, and productive people, who are the future. More paper pushers get into the system, only for the cycle to continue. Ultimately, they become unmanageable and poorly run behemoths (like GM) and will need a heck of direct bailout if they fail. Except that the next time, there wont be any money left. We would have become (or are we already?) a fourth world banana republic with a first world appearance.
a pharma company is not essential to the economy. no matter how big it gets, no congressman or any reasonable person would expect that they need to be bailed out.
Yep, that's pretty much it. Talk to the invisible hand about looking five years into the future instead of just one quarter...
"Mergers make companies less innovative and end up firing the best scientists..."
So true. And mergers tend to drive the competition out of business. Guys who might have the inside track on the next cure for some horrible disease. This sort of consolidation, on this scale, is everything that is wrong with an already bad system.
If pfizer doesnt get to "acquire" a pipleline in next year or two, guess what. Best scientists are going to be laid off at a faster scale.
the proverbial sh** has hit the fan on Pfizer. No drugs in pipeline and plenty of drugs going offpatent in next 6 years. Drug development R&D is a long term process, but not a near term fix.
Pfizer is acquring Wyeth for near term fix, not long term solution.
Why would Pfizer, a pharmaceutical company which no doubt has had WINDFALL profits in the past 10 years of drugged up America, be bailed out?
Wow... we are so out of control as the tax payers.... while the rich get richer adn the greedy get even more greedy.
What a shameful country this has become. I'm embarassed to be an American.
I don't feel like a citizen; I feel like a victim.
Why are they being bailed out? They are doing a business transaction, they need money, they ask the bank, they can pay it back with interest, they get the money. That's not a bailout. It's business as usual. The bank earns real money on this one with next to no risk, which means that the bank will less likely need another bailout.
"I don't feel like a citizen; I feel like a victim."
In this case the feeling is unsupported by facts. You are being screwed, but neither by Pfizer nor by Wyeth.
pfizer is NOT getting bailed out in any sense of the way !! someone needs to go out in real world !!
People. its simple.
Pfizer gets money because they are most likely to pay off the loan in its entirety...to all the banks..and they make nice chunka change.
their job is to make profits remember. not to promote some particular social outcome that a bunch of non-business people think. if small businesses come up with an outstanding plan that would make the banks a lot of money then they would be doing that no? they dont have anything in particular against other businesses.
Pfizer is one of the strongest companies in the world in form of balance sheet (not in terms of future revenue i agree). so they are one of the "duh !!" candidates to get funding.
its recession time. the banks have to be careful who tehy lend it to now, considering the huge hole in their balance sheets.
This is ridiculous.
I want to know why the Big 3 were the only ones receiving bailout money that had to be absolutely GRILLED.
I also want to know why the President that I and 69 million other voters supported is letting the losing, minority party dictate terms in the stimulus package.
The PEOPLE need a bailout. The corporations are only consolidating, becoming even BIGGER, and misusing bailout money. The bailout money was supposed to stimulate LENDING not acquisitions! If not for the free money, would Pfizer buy Wyeth? This is so wrong. Banks are choosing the winners and losers of the economy. And they are doing it with OUR money while they lobby with our money to make sure that WE remain wage-slaves.
It really is becoming difficult to read the news each day. More corruption and greed causing damage to the US.
This isn't corruption. It's not greed, either. Both Pfizer and Wyeth looking at the abyss(check out the void of their pipelines). Now, jumping together won't make them any more likely to do better, but you can simply chalk this move up to the desperation of their management teams. And that's pretty much it... they simply don't know what else to do.
Years ago they had their hands in the cookie jar of social Security, Today the hands are in the jar of your granschildrens college education! This is "change"??
I strongly voted for President Obama and I would like to think that I have faith in him as well, but I have lost all confidence in the American government, large corporations and the illegal use of lobbying.
Lobbiers are all in the pockets of all our politicians and tonight I read about; David Sirota :: Corporate Lobbyists Move to Crush "Buy American" Provisions In the Stimulus Bill "U.S. Corporations Demand the U.S. Taxpayer Should Not Buy American" the U.S. chamber of Commerce, G.E. and Catepiller are trying to strip out the Buy American provisions in the bill U.S. corporations try to fight support of U.S. manufacturing.
The threat that the Buy American measure would spark protectionist measures by other countries that might deepen a global recession., goods, raw materials and demand they do not have to buy materials and supplies from other American companies. need to read this article,,,
http://tr.im/d6x77
Furthermore, US businesses no longer represent US interests yet they will be successors of the stimulus package. This Pfizer, using money from taxpayer-bailed-out banks to help buy major pharmaceutical competitor Wyeth with a possiblity of it leading to the loss of 20,000 jobs is just another nail in the coffin.
This being an empty room I needed to vent .
It's getting old. Why, why, why... because Pfizer wants to buy Wyeth, that's why. Industry experts agree that there is no upside for either company, the industry or anyone else. However, in deals like these there is always an upside for the banks. They will make money on this. And that's why they are "helping". That's simply their business. Wow... imagine that, a bank making money by lending money. Scandalous!
Here we go round in circles...
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