The Greenlining Institute: "Pfizer Inc.’s Wyeth acquisition perverts the U.S. government’s Troubled Asset Relief Program"

Pfizer Inc.’s Wyeth acquisition perverts the U.S. government’s Troubled Asset Relief Program, relying on loans from five banks aided by the bailout for a deal that will cut 19,500 jobs, a California advocacy group said.

The Greenlining Institute asked the Justice Department and Treasury Secretary Timothy Geithner to block the $64.6 billion transaction unless the companies lower consumer drug prices, said Bob Gnaizda, an attorney for the public policy group, in a telephone interview today. The letters, sent Jan. 29 by the Berkeley, California, group, ask whether the deal abuses taxpayer funds.

TARP funds were meant to bolster the economy by promoting lending, not finance job cuts, Gnaizda said. Pfizer, based in New York, said 19,500 jobs will be eliminated from the combined companies. The deal is financed by $22.5 billion in loans from banks that received at least $75 billion from the Treasury Department’s rescue plan, the drugmaker said on Jan. 26.

Backing the acquisition with bailout money is “a kind of perversity,” Gnaizda said. “There’s no way this deal could occur without the use of TARP money.”

Pfizer climbed 31 cents, or 2.1 percent, to $14.89 in New York Stock Exchange composite trading at 4:15 p.m. The world’s largest drugmaker fell 16 percent last week after the deal was announced and lost 37 percent in the past 12 months. Wyeth, based in Madison, New Jersey, rose 23 cents, or less than 1 percent, to $43.20.

Drop ‘Not Unusual’

Pfizer’s drop last week, which reduced the value of the deal from its initial $68 billion, is “not unusual” for acquisitions, Chief Executive Officer Jeffrey Kindler said in an interview on CNBC television today. The company’s decision to halve its quarterly dividend also had an impact on shares, Kindler said.

The Justice and Treasury departments haven’t responded to the letters, Gnaizda said. Spokesmen for the departments didn’t immediately return calls seeking comment. Ray Kerins, a Pfizer spokesman, said he couldn’t respond to the complaint because he hadn’t seen it.

JPMorgan Chase & Co., Bank of America Corp., Barclays Plc, Citigroup Inc. and Goldman Sachs Group Inc. assembled the loan package for Pfizer. All but Barclays have tapped TARP, according to data gathered by Bloomberg.

The deal amounts to “a bailout of two of America’s largest big pharma companies and sets a precedent for similar misuses of TARP funds,” Greenlining’s letter to Geithner says.

Drug Prices

The letter to Attorney General Eric Holder and the Justice Department’s antitrust division asks the government to block the deal unless Pfizer and Wyeth agree to sell medicines in the U.S. at no more than the lowest price they charge in Europe, Canada and other developed countries, Gnaizda said.

“You have the use of this money to promote something that’s anticompetitive and against the public interest and is also taking scarce funds away from what otherwise would be lending to small businesses,” Gnaizda said in the interview.

The complaints are unlikely to delay the deal, though they will create “perception problems” for Pfizer in the future, said Les Funtleyder, a Miller Tabak & Co. analyst in New York, in a telephone interview.

Pfizer shares rose today on Kindler’s public comments and a broader rise in financial markets, Funtleyder said. The Standard & Poor’s 500 Pharmaceutical Index, including Pfizer and 12 other companies, rose 0.7 percent today.

“The stock couldn’t keep going down forever,” Funtleyder said.

Two Lawsuits

The acquisition prompted two lawsuits from Wyeth shareholders who said their board should have held out for a better price.

The deal deprives investors of “the full benefit of the company’s stronger patent portfolio,” shareholder Anna Meisher said in a complaint filed Jan. 30 in Delaware Chancery Court. Meisher asked a judge to declare the deal “unlawful and unenforceable,” and rescind any merger agreement.

Pfizer said Jan. 26 it would pay $33 plus 0.985 of a Pfizer share for each share of Wyeth, valuing shares of Wyeth at $50.19. The value has fallen as Pfizer shares declined.

The case is Anna Meisher v. Bernard Poussot, CA4329, Delaware Chancery Court (Wilmington). The second complaint, filed Jan. 27, is Sheldon Drogin v. Wyeth, 09-cv-383, U.S. District Court, District of New Jersey (Newark).

To contact the reporter on this story: Alex Nussbaum in New York anussbaum1@bloomberg.net.