WARNER-LAMBERT: Merger Tactics Blasted by CalPERS, Others
In letters to Warner-Lambert Co. Chair Lodewijk J.R. de Vink, two "influential" pension funds -- California Public Employees' Retirement System (CalPERS) and the city of New York's pension funds -- question "the company's tactics in its planned merger with American Home Products Corp.," the Wall Street Journal reports. Pressure from the Warner-Lambert investors increases as the value of Pfizer Inc.'s proposed deal, valued at $72.5 billion, "dwarfs" the rival American Home Products bid of $52.8 billion. Moreover, AHP's bid value continues to shrink, because of concerns about the company's fen-phen settlement. CalPERS, the nation's largest public pension fund and owner of 3.7 million shares of Warner- Lambert stock, stated, "Warner-Lambert shareholders deserve to have all potential transactions fully and fairly evaluated." Stating that CalPERS had not taken a position in respect to the competing AHP and Pfizer bids, fund CEO James Burton expressed concern "that Warner-Lambert [wasn't] giving Pfizer a chance" and questioned Warner-Lambert's strategy of filing suit against Pfizer over their agreement to co-market the blockbuster cholesterol drug Lipitor. Burton wrote, "I am forced to ask whether you have in fact used reasonable efforts to avoid what will surely be an expensive, divisive and yet not necessarily productive series of lawsuits."
Writing on behalf of the city of New York, which owns 3.5 million shares of Warner-Lambert, city Comptroller Alan Hevesi "offered much harsher criticisms," saying that the Warner-Lambert board of directors "has committed an egregious breach of its fiduciary obligations." The board of the Council of Institutional Investors -- representing 115 public, private and union pension funds -- recently voted to file an amicus brief "in favor of Pfizer and against Warner-Lambert." Sarah Teslik, executive director of the council, said, "We're not saying it's a better deal, we're saying you have to be informed," adding that overlooking other deals "is not what we pay [firm executives] for. We elect them." While the pension funds' views "are similar to sentiments expressed by other investors," the Wall Street Journal notes that they are significant because "their views ... carry weight in institutional-investor circles." In response to the investor pressure, a Warner-Lambert spokesperson said only that de Vink plans to reply soon to the letters (Lipin, 1/12).