The news at a glance

Big Pharma: Pfizer gobbles up Wyeth

Pfizer, the world’s biggest drugmaker, agreed this week to buy rival Wyeth for $68 billion, said Shannon Pettypiece in Bloomberg.com. Pfizer makes cholesterol fighter Lipitor, the world’s best-selling drug, with $12 billion in annual sales. But Lipitor’s patent expires in 2011, and Pfizer has nothing in its development pipeline to replace it. Wyeth’s Effexor antidepressant and its Prevnar pneumonia vaccine will offset some of the lost sales, and “Wyeth plans to seek U.S. approval this year for a new version of Prevnar that would fight six additional strains of pneumonia.”

The deal is “the first big merger backed by Wall Street in months,” said Andrew Ross Sorkin and Duff Wilson in The New York Times. Five banks will put up a total of $22.5 billion, with the remaining purchase price financed through a combination of stock and Pfizer’s own cash reserves. “Because of the ailing economy, Pfizer has agreed to pay a staggering breakup fee of $4.5 billion” if the deal does not go through. That’s about twice the customary fee for deals of this size.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

Employment: The layoffs keep piling up

An already gloomy employment picture turned even darker this week, with big U.S. companies announcing “they would slash a total of 45,000 jobs,” said Jack Healy in The New York Times. The biggest hit came at heavy-equipment maker Caterpillar, which will lay off 20,000 employees as construction projects dry up around the globe. Telephone-service provider Sprint Nextel will lay off 8,000 workers, while 7,000 employees of Home Depot will lose their jobs. The announcements follow last week’s news of 5,000 job cuts at Microsoft.

GE: A worrisome earnings report

General Electric last week reported fourth-quarter earnings that largely met Wall Street’s diminished expectations, said Paul Glader in The Wall Street Journal. But GE’s relatively modest profit of $3.72 billion on revenue of $46 billion “failed to resolve investor qualms about the recession’s impact on its industrial and financial businesses.” GE’s profits fell 44 percent from the fourth quarter of 2007 as its longtime profit engine, GE Capital, saw revenues tumble as the recession forces businesses and consumers to limit borrowing or default on loans.

Real estate: Toll Brothers sweetens the pot

In a bold bid to “shock the flat-lining new-home market into action,” home builder Toll Brothers last week unveiled cut-rate financing on its inventory of unsold homes, said Les Christie in CNNmoney.com. The offer to qualified buyers of a 3.99 percent fixed-rate mortgage, with no upfront points, is sharply lower than this week’s U.S. average prime mortgage rate of 5.59 percent. “The offer is aimed at people waiting for the rates to drop,” said Don Salmon, head of Toll’s mortgage subsidiary.

International: The Satyam plot thickens

The accounting scandal at Satyam Computer Services, India’s

fourth largest outsourcing firm, continued to spread last week,

said Joe Leahy in the Financial Times. Financial authorities in India arrested two employees of PricewaterhouseCoopers, Satyam’s outside auditor, amid reports that former Satyam CEO Ramalinga Raju “siphoned off” hundreds of millions of dollars by setting up payroll accounts for 13,000 fictitious employees. Raju, who has confessed to doctoring Satyam’s books, denied the phantom-payroll scheme. The arrests of the two auditors suggest that authorities believe Raju had assistance in perpetrating his fraud.