SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
November 19, 1999
Date of Report (Date of earliest event reported)
WARNER-LAMBERT COMPANY
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-3608 22-1598912
(Commission File Number) (IRS Employer Identification No.)
201 Tabor Road, Morris Plains, New Jersey 07950-2693
(Address of principal executive offices) (Zip Code)
(973) 385-2000
(Registrant's telephone number, including area code)
Item 5. Other Events.
On December 2, 1999, the board of directors of
Warner-Lambert Company ("Warner-Lambert") sent a letter to Warner-Lambert
shareholders. This letter is attached hereto as Exhibit 99.1 and is
incorporated herein by reference.
A copy of Warner-Lambert's press release, dated December 2,
1999, relating to the shareholder letter, is attached hereto as Exhibit
99.2 and is incorporated herein by reference.
Copies of Warner-Lambert's press releases, dated November
23, 1999, and November 19, 1999, are attached hereto as Exhibits 99.3 and
99.4 respectively, and are incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
(99.1) Letter to the Shareholders of Warner-Lambert
Company, dated December 2, 1999.
(99.2) Press Release, dated December 2, 1999.
(99.3) Press Release, dated November 23, 1999.
(99.4) Press Release, dated November 19, 1999.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
WARNER-LAMBERT COMPANY
By: /s/ Rae G. Paltiel
__________________________
Name: Rae G. Paltiel
Title: Secretary
Dated: December 2, 1999
EXHIBIT INDEX
(99.1) Letter to the Shareholders of Warner-Lambert Company,
dated December 2, 1999.
(99.2) Press Release, dated December 2, 1999.
(99.3) Press Release, dated November 23, 1999.
(99.4) Press Release, dated November 19, 1999.
EXHIBIT 99.1
Warner-Lambert Company
201 Tabor Road
Morris Plains, New Jersey 07950
[Warner-Lambert Logo]
December 2, 1999
To The Shareholders Of
Warner-Lambert Company
Perhaps not surprisingly, recent events regarding
Warner-Lambert Company's proposed strategic business combination with
American Home Products Corporation, and Pfizer Inc.'s efforts to acquire
Warner-Lambert, have generated much commentary, a range of questions and
quite a bit of confusion. We are writing this letter because you are
entitled to hear directly from your Board of Directors about these matters.
OUR CONSTANT COMMITMENT - SHAREHOLDER VALUE
As your Board of Directors, we believe that our first
responsibility is to serve your interests -- by building shareholder value.
Toward this goal, from year end 1994 through the projected year end 1999,
Warner-Lambert's annual revenues have grown from $6.4 billion to an
estimated $12.8 billion and from December 31, 1994 through October 31,
1999, Warner-Lambert's market capitalization has grown from $10.4 billion
to $68.6 billion and its share price (adjusted for stock splits) has
increased from approximately $12 3/4 to approximately $79 3/4.
OUR STRATEGIC REVIEW
Notwithstanding Warner-Lambert's excellent performance and
prospects, in November 1998 we commenced a review of Warner-Lambert's
growth initiatives, which management had been studying since June 1998.
This review grew out of our belief that, as directors, we need to maintain
an ongoing proactive effort to address future value enhancement for the
benefit of shareholders.
Following our November 1998 meeting, management, with
McKinsey & Company's assistance, continued this strategic review process
for approximately eight months. During this period, management evaluated
Warner-Lambert's long-term position in the pharmaceutical and consumer
healthcare industries in order to develop the company's strategic plan for
the future.
The process culminated in a Board meeting in late June 1999.
At that time we reviewed management's evaluation and concluded that
Warner-Lambert, with its world class research facilities and staff and its
future product pipeline, had excellent capabilities and growth prospects.
We also concluded that those strong capabilities and prospects could be
better enhanced for our shareholders if Warner-Lambert engaged in a
strategic merger, with a company with complementary products and pipeline,
that enhanced Warner-Lambert's already strong position.
OUR RATIONALE AND PROCESS FOR SELECTING AHP
Prior to the June 1999 Board meeting, John R. Stafford,
chairman, president and chief executive officer of American Home Products,
telephoned Warner-Lambert's chairman, president and chief executive
officer, Lodewijk J. R. de Vink. During the course of the telephone
conversation, Mr. Stafford expressed his interest in exploring the
possibility of a business combination between the two companies. Mr. de
Vink deferred any discussions until after the June Board meeting
consideration of Warner-Lambert's strategic alternatives.
As part of that June Board meeting review of
Warner-Lambert's strategic path, we considered an analysis of industry
participants that might best satisfy the strategy we favored. AHP was at
the top of the list, and the clear first choice, based on a comparative
assessment of a number of criteria, including expansion and strengthening
of therapeutic area focus, building and strengthening of a technology
platform, strengthening of the overall pipeline (particularly near term),
continued building of an OTC presence and expected ease of integration. A
transaction with AHP, we concluded, would not only enhance Warner-Lambert's
growth potential based on Warner-Lambert's highly successful growth
strategy, but would insure that our shareholders would have a very large
participation in that value creation. At the end of the meeting we
authorized Mr. de Vink to explore whether such a strategic business
combination with AHP could be developed.
Warner-Lambert's discussions with AHP began in early July.
However, during the course of these discussions, a jury in Texas awarded a
significant verdict for the plaintiff in one of a large number of personal
injury diet drug lawsuits against AHP. Because of the impact on AHP's stock
price, and the uncertainty regarding AHP in light of the diet drug
litigation, discussions were suspended in late August while AHP pursued an
overall settlement of the litigation. Then, on October 7, 1999, AHP
announced that it had entered into a memorandum of understanding regarding
a comprehensive national settlement relating to its diet drug litigation.
In light of this development, strategic business combination
discussions were revived. By October 25, 1999, all aspects of such
discussions between Warner-Lambert and AHP were far along (including the
terms of the termination fees and cross options which AHP had insisted
upon), although certain business, financial, contract and due diligence
matters were still unresolved or in process.
By this time, we had addressed the potential
Warner-Lambert/AHP business combination at six Warner-Lambert Board
meetings. While no decision had been made, and we were particularly
interested in hearing a report from special counsel we had engaged to
examine the diet drug litigation, we understood by this time that combining
with AHP on the terms then contemplated presented a unique and significant
strategic and value creation opportunity for Warner-Lambert shareholders.
OUR DEALINGS WITH PFIZER
Pfizer's Pre-existing Confidentiality and Standstill
Promises. Well before these recent events, in June 1996, Warner-Lambert had
entered into a series of co-promotion and marketing agreements with Pfizer
regarding Lipitor(R), a drug discovered and developed by Warner-Lambert's
research and development group for use in lowering cholesterol levels. As
part of these arrangements, Pfizer agreed to provisions intended, once
Pfizer had access to confidential information concerning Lipitor(R),
including its projected financial performance, to prevent Pfizer from
influencing or controlling Warner-Lambert or its destiny for Pfizer's own
purposes. These provisions were intended to protect the value of Lipitor(R)
for Warner-Lambert's shareholders, not Pfizer's.
Specifically, Pfizer agreed not to use confidential
information about Lipitor(R) other than in performance of the Lipitor(R)
arrangements. It also agreed to "standstill" provisions, which included
Pfizer's promises not to (1) offer or propose to acquire Warner-Lambert,
(2) engage in any consent solicitation regarding Warner-Lambert or (3) seek
to change or request Warner-Lambert to waive any of these provisions. The
parties expressly agreed that Pfizer would be released from these
standstill provisions if Warner-Lambert were a party to a business
combination with another company -- but only if the other company were an
"acquiring party." A "merger of equals," such as that contemplated by the
Warner-Lambert/AHP combination, does not involve either party acquiring the
other.
Pfizer's First Approach/Our Response. On October 25, 1999,
without any prior indication to Warner-Lambert that he might do so, Mr.
William C. Steere, Jr., chairman and chief executive officer of Pfizer,
delivered a letter to Mr. de Vink "seek[ing]... permission to make a
[business combination] proposal along the lines we have in mind."
Mr. de Vink promptly called a Board meeting, which was
convened on the morning of October 27, 1999. We discussed the October 25th
letter from Pfizer and its implications for the pending transaction with
AHP. We found the letter somewhat surprising, first, in light of prior
public statements by Pfizer that it was not interested in acquiring other
pharmaceutical businesses, but would grow internally, and, second, because
the letter plainly breached Pfizer's standstill agreement. Nonetheless,
neither Mr. de Vink nor we chose to ignore Pfizer's letter. To the
contrary, Mr. de Vink instead recommended and we concurred that he should
meet with Mr. Steere. We also concurred that Mr. de Vink should advise Mr.
Stafford of the letter and of the proposed meeting. Mr. de Vink telephoned
Mr. Steere that day and indicated that he was disappointed and surprised
that, given the close business relationship between the companies, Mr.
Steere would without notice deliver a letter of that nature rather than
simply pick up the phone. Mr. de Vink further indicated, however, that
while Warner-Lambert was not waiving the standstill agreement, he wished to
meet with Mr. Steere as soon as possible to discuss the letter.
Later that afternoon, Mr. de Vink went to Pfizer's offices
to meet with Mr. Steere. The meeting lasted about 45 minutes. A number of
matters were raised relating to the October 25th letter, including the
following:
(1) In direct response to the October 25th letter, Mr. de
Vink inquired as to what Mr. Steere had in mind with respect to the
business combination referred to in his letter;
(2) Mr. Steere responded that he had not really given a lot
of thought to the matter, and indicated that he did not have any specific
terms of a transaction in mind, that he had not discussed a business
combination transaction between Pfizer and Warner-Lambert with Pfizer's
board (although he personally believed Pfizer was the best partner for
Warner-Lambert), that management of the combined company could come from
both companies, that the boards could be combined and that dislocations in
achieving cost savings could be shared by both companies;
(3) Mr. Steere stated that if his means of communication had
offended Warner-Lambert, he would be willing to "tear up" his letter;
(4) Mr. Steere also said Pfizer was separately pursuing a
sizable acquisition and might not be capable of pursuing concurrently both
that acquisition and a Warner-Lambert transaction;
(5) Mr. Steere said that at a regularly scheduled Pfizer
board meeting to be held the next day he would mention his discussion and
meeting with Mr. de Vink to Pfizer's directors, who, according to Mr.
Steere, at this time were unaware of his letter; and
(6) Although Mr. Steere referred to a potential premium that
Pfizer might offer, he said that he viewed Warner-Lambert as already
"expensive" to acquire.
Mr. Steere made no inquiry in that meeting as to the status
of any transaction that Warner-Lambert might be pursuing. The meeting ended
with Mr. Steere asking if he could talk to Mr. de Vink in two weeks. Mr. de
Vink said that this did not fit his timetable and that he would call Mr.
Steere the next day following Pfizer's board meeting.
Our Board met again the next morning. Mr. de Vink reported
what had occurred in his meeting with Mr. Steere. We discussed, among other
things, the vagueness and tentativeness of the thoughts expressed by Mr.
Steere, including that he had no specific terms in mind regarding a
business combination with Warner-Lambert, that he had not previously
discussed the possibility with his board and that, because of another
transaction the Pfizer board was actively considering, if any
Warner-Lambert/Pfizer transaction might develop, its timing might only be
in the indefinite future. We also discussed the proposed strategic business
combination with AHP and its rationale. For a number of reasons, we
concluded that it would not be in the best interests of Warner-Lambert's
shareholders to pursue what, effectively, would be a possibility of an
acquisition of Warner-Lambert by Pfizer. Among our reasons were:
(1) We had recently reached a clear conclusion, after
extensive study, as to the best strategic path for Warner-Lambert. That
strategic path did not include being acquired at this time by a
significantly larger company which would result in Warner-Lambert's
carefully developed strategy for growth and value enhancement being
abandoned and replaced with that of the larger company;
(2) We continued to believe (although no final decision had
been made) that the proposed business combination with AHP represented a
very valuable opportunity, both in absolute and relative terms, for
implementing our strategic path conclusion for creating value for
Warner-Lambert shareholders; and
(3) We were quite aware of the advanced stage and
satisfactory nature of the discussions with AHP, and the significant risk
of losing the AHP transaction if Warner-Lambert were suddenly to pursue a
possible transaction with Pfizer that was, at best, based on Pfizer's
chairman's own statements, in our view a"gleam in his eye" but nothing
more. In that regard, we took note of the fact that Mr. Steere had proposed
no terms, that he had referred to Warner-Lambert as "expensive" even at
current levels, that he said he was pursuing another transaction and that
he was not sure he could pursue two at once. We also understood that a
company in AHP's position would be expected to be very unwilling to play
the "stalking horse" by keeping its transaction available while Pfizer made
up its mind what it wanted to do. This seemed to us especially to be the
case with AHP, which recently had been involved in a publicly announced
business combination and a separate series of publicly announced
discussions regarding a business combination, neither of which resulted in
a completed transaction.
Later that same day, October 28, 1999, Messrs. de Vink and
Steere spoke by telephone. Mr. de Vink informed Mr. Steere of our
conclusion that we did not wish to abandon our strategic path to pursue a
course involving an acquisition of Warner-Lambert by Pfizer. Mr. de Vink
advised Mr. Steere that Warner-Lambert was considering a strategic business
combination and that, were that to be accomplished, he would be open in the
future to talking again when the two companies could be of more comparable
size. Mr. de Vink assured Mr. Steere that the strategic combination being
considered by Warner-Lambert would not negatively affect Warner-Lambert's
Lipitor(R) arrangements with Pfizer and expressed hope that Pfizer would
also act in good faith. Mr. Steere expressed disappointment that
Warner-Lambert did not select Pfizer, but wished Mr. de Vink good luck and
indicated that he was not inclined at that time to take any action if
Warner-Lambert were to announce a transaction with another party. At no
time in the conversation did Mr. Steere make or indicate a desire to make a
specific offer with respect to a business combination between
Warner-Lambert and Pfizer, nor did he indicate that he had made any
progress in his own mind in formulating the terms of any such proposal. Mr.
Steere said nothing to indicate that the Pfizer board had even considered
the issue at its meeting earlier that day.
On October 31, 1999, we met to consider a broad range of
matters relating to the proposed AHP business combination, but not to take
action. These matters included reviewing, with the participation of
management and our outside legal advisors (who advised us early in the
meeting as to our duties and responsibilities as directors) and financial
advisors:
(1) the strategic path we had selected;
(2) the attributes of Warner-Lambert and AHP, separately and
on a combined basis, in light of this strategic path;
(3) the principal terms of the transaction documents,
including how certain of these terms (including the termination fees, cross
options and the other terms described below) would operate in the event of
or affect any post-signing third party interest in Warner-Lambert or AHP;
(4) the financial terms of the proposed combination,
including their fairness to the Warner-Lambert shareholders;
(5) due diligence activities, including an extensive report
by counsel regarding AHP's diet drug litigation and proposed settlement;
and
(6) open issues and timing.
Mr. de Vink reported on his October 28th telephone
conversation with Mr. Steere. We concluded that the merger of equals with
AHP was a highly desirable business opportunity for Warner-Lambert and that
Pfizer's interest was vague and tentative, and questionable as to whether
it would ever be pursued. We also concluded that it would be unwise to
delay and jeopardize the highly desirable and deliberately conceived AHP
deal. As a result of this review, we instructed management to finalize
merger negotiations with AHP and complete the necessary transaction
documents. Our understanding was that these matters could be concluded
promptly and that we likely would have a meeting or meetings sometime
during the week to review the results of additional due diligence and
consider and vote on a definitive transaction.
On November 3, 1999, media stories discussed a potential
merger between Warner-Lambert and AHP. Upon learning the previous evening
of that leak of information, the decision was made to accelerate our final
consideration of the proposed AHP merger and a Board meeting was scheduled
for late on November 3.
Pfizer's Second Approach/Our Response. On November 3, 1999,
following the appearance of the media stories, Mr. Steere sent another
letter to Mr. de Vink stating that Pfizer was interested in a business
combination with Warner-Lambert and that he would like to meet to discuss
his thoughts on the matter. This letter, again, did not elaborate on the
meaning, or terms, of a business combination and made no specific proposal.
That same day, a Pfizer director contacted an outside director of
Warner-Lambert to inquire if the Board was aware of the Pfizer interest,
which the Warner-Lambert director confirmed. The Pfizer director also said
that he had been aware, at or about the time of Mr. Steere's first letter
to Mr. de Vink, of Mr. Steere's interest in pursuing an acquisition of
Warner-Lambert. Also on November 3, another Pfizer director contacted a
second Warner-Lambert director to note Pfizer's interest in acquiring
Warner-Lambert. When told that Pfizer would not be able to use
pooling-of-interests accounting, the Pfizer director indicated that they
understood this and that it was not a problem.
Our Board met later on November 3, 1999. The final
resolution of the key terms of the AHP transaction documents were described
to us, our financial advisor, Bear, Stearns & Co. Inc., delivered its
fairness opinion, and we received further advice concerning our duties and
responsibilities as directors. We focused particularly on, and actively
discussed, among other things:
(1) the letters from Mr. Steere and contacts from the other
Pfizer directors, and the fact that still no specific proposal had been
made by Pfizer;
(2) our continuing belief in the shareholder value
opportunity represented by the strategic path we previously had chosen and
the unique implementation opportunity presented by the definitive
transaction terms with AHP;
(3) our concern that it would not be in the best interests
of Warner-Lambert's shareholders to pursue an indefinite expression of
interest from Pfizer, which if it materialized at all seemed to be months
away, particularly if pursuing such interest would put the AHP transaction
at risk;
(4) AHP's position, as stated to Warner-Lambert and reported
at the Board meeting, that AHP would not continue discussions with
Warner-Lambert or remain willing to agree to a business combination with
Warner-Lambert if Warner-Lambert commenced negotiations with Pfizer;
(5) our specific resulting understanding that, in order to
commence negotiations with Pfizer at that time, Warner-Lambert effectively
would be abandoning the fully developed, extremely attractive transaction
with AHP that it had been working on for the prior four months;
(6) that AHP had not changed its position, which it had
taken since the outset of discussions in July, that its willingness to
enter into a transaction with Warner-Lambert was conditioned on including
in the terms of the transaction the termination fee and stock option grant
to AHP which it had been proposing, and our belief that such provisions
were not unusual in transactions of this type;
(7) as to the termination fee, the view of Warner-Lambert's
financial advisor, Bear, Stearns & Co. Inc., as to the reasonableness of
the fee in relation to comparable transactions; and
(8) as to the stock option grant by Warner-Lambert to AHP,
the accounting impact that it might have on third parties if they were to
intervene. We noted that some potential parties would not care about
pooling accounting (possibly including Pfizer, based on the Pfizer
director's comment), including because pooling accounting was not available
to non-U.S companies and, even in the U.S., pooling accounting would not
likely be available after December 31, 2000.
We were, of course, also fully informed of the material
terms of the transaction documents and, contrary to Pfizer's assertions,
understood and weighed their implications. We also noted, as we had in the
past, that if Pfizer had a particular proposal to make, it would likely
have done so since, although professing written concern about its
standstill agreement, Pfizer's prior actions certainly had disregarded this
agreement, and Mr. de Vink had asked Mr. Steere what he had on his mind.
We also understood and considered that all of the
transaction provisions which placed some constraint on third party interest
are mutual -- that is, for example, AHP has granted Warner-Lambert a
reciprocal option on AHP shares and has agreed to pay Warner-Lambert a
termination fee. The time and effort expended on, expense incurred in, and
potential opportunity cost of, agreeing to a large and complicated business
combination is considerable. This is especially so with a transaction
expected to be pending and open to third party intervention for over six
months. Therefore, for the benefit of Warner-Lambert shareholders, we
wanted to obtain some protection in the event that a third party intervened
by bidding for AHP, thus possibly depriving Warner-Lambert shareholders of
the benefit of the contemplated merger of equals with AHP. In fact, we were
aware of rumors that AHP might be a target. We surely could not have
obtained this protection for Warner-Lambert without being willing to give
AHP the same protections which it was demanding.
At the end of the meeting, we unanimously concluded that the
best interests of Warner-Lambert's shareholders clearly were served by
going forward with the AHP transaction, rather than running the high risk
or certainty of losing it. The final agreements were signed by both
companies that evening. A press release announcing that Warner-Lambert and
AHP had agreed to combine in a merger of equals was released early the next
morning, November 4, 1999.
The investment community's reaction to the combination was
immediate and very favorable. Within hours of the announcement and an
analyst meeting in the morning at which Warner-Lambert and AHP described
the transaction and summarized its contemplated benefits, the prices of
both companies' stock rose and by midday reflected an aggregate market
value increase of over $10.4 billion from their combined market value prior
to the media stories on the preceding day.
Pfizer's Third Approach/Our Response. Later in the day on
November 4, 1999, Mr. Steere, in violation of Pfizer's standstill and
confidentiality obligations, sent a letter to Warner-Lambert containing a
conditional offer to acquire Warner-Lambert in a merger in which
shareholders of Warner-Lambert would receive 2.5 shares of Pfizer common
stock for each share of Warner-Lambert common stock. Pfizer conditioned its
offer on the elimination of the termination fee and stock option grant, to
which Warner-Lambert was contractually bound in its signed agreements with
AHP. Pfizer also started a lawsuit claiming these provisions to be invalid.
Under the merger agreement between Warner-Lambert and AHP,
each company has retained the right to deal with acquisition proposals made
to it after the agreement was signed. Specifically, if a proposal is made
to Warner-Lambert which the Board, in good faith, believes is, or is
reasonably likely to result in, a superior proposal to the AHP transaction,
then Warner-Lambert may enter into discussions and negotiations with the
party making the proposal. We also have the right to change our
recommendation if, as a Board, we determine that another proposal is
superior. While AHP and Warner-Lambert both have agreed to submit their
transaction to a shareholder vote even if one or both changes its
recommendation, the shareholders will have the final say as to whether to
proceed, or to reject in favor of another proposal that has been made,
which could then be pursued promptly.
Under the merger agreement, in order for us, as a Board, to
find that an acquisition proposal is superior, we must conclude, in good
faith, both that (1) it is better for Warner-Lambert shareholders from a
financial point of view than the AHP combination and (2) it is reasonably
capable of being completed. We addressed Pfizer's proposal promptly under
the capability of completion test in the merger agreement. Because Pfizer
conditioned its proposal on the elimination of contractual provisions in
Warner-Lambert's agreement with AHP, which Warner-Lambert has no ability by
itself to remove and has no reason to believe that AHP will agree to
remove, we were unable to conclude that Pfizer's conditional proposal on
its face is reasonably likely to be completed.
Moreover, we do not believe that Pfizer's legal challenge to
the provisions to which it objects, based essentially on claims that we
breached our fiduciary duty to you, will be successful. So, based on the
facts then existing, we concluded on November 4 that Pfizer's conditional
acquisition proposal did not meet the capability of completion test, and
that we were not in a position at that time to take any action with respect
to the Pfizer proposal. We publicly announced this that same day.
OUR LIPITOR(R) CLAIM
On November 29, 1999, Warner-Lambert filed a counterclaim in
a lawsuit started by Pfizer in Delaware against Warner-Lambert and AHP. The
counterclaim asserts that, as a result of massive and intentional breaches
by Pfizer of its agreements with Warner-Lambert relating to Lipitor(R),
Warner-Lambert is entitled to a declaratory judgment that Warner-Lambert
has the right to terminate the Lipitor(R) agreements and reclaim the full
value of Lipitor(R) for Warner-Lambert and its shareholders.
This counterclaim was authorized by us only after careful
consideration. We concluded, and the counterclaim states, that Pfizer has
materially breached the Lipitor(R) agreements by violating both its
standstill agreement and its obligations not to use Lipitor(R) confidential
information for any purpose other than in performance of the Lipitor(R)
agreements
The plain fact is that Pfizer is attempting to seize the
value of Lipitor(R) for itself by ignoring the contract provisions which
were intended to place Warner-Lambert in the position to maximize that
value for the benefit of Warner-Lambert and its shareholders. Pfizer
bargained for -- and received -- valuable rights relating to Lipitor's(R)
performance. However, its rights represent only a partial participation in
Lipitor's(R) profitabiliTy (through February 28, 2007 with respect to U.S.
participation), can be terminated early (as of April 1, 2002 with respect
to U.S. participation) with a resulting reduced Pfizer participation, and,
in any event, do not cover the full term of the Lipitor(R)-related patents
which extends well into the future. In exchange for granting Pfizer rights
relating to Lipitor(R), Warner-Lambert sought and obtained Pfizer's
promises regarding confidential information use and standstill
restrictions. These restrictions were intended to prevent Pfizer, once it
had partial access to Lipitor's(R) value, from interfering with
Warner-Lambert's determining its own destiny and capturing the value of
Lipitor(R) for itself. Importantly, this includes Warner-Lambert's
retaining its ability to bargain with Pfizer and other parties, with the
critical ability to say "no," over the terms of any extended rights to
Lipitor(R).
Now, recognizing the enormous value of Lipitor(R), as well
as Warner-Lambert's overall strength, Pfizer has chosen simply to ignore
these material restrictions. What is more, by threatening a consent
solicitation to remove and replace your Board, Pfizer has discarded all
pretense of maintaining the integrity and protection of an arms' length
relationship which Warner-Lambert bargained for and Pfizer promised.
In view of the significant value reallocation that should
occur between Warner-Lambert and Pfizer due to Pfizer's deliberate breach
of these material terms of the Lipitor(R) agreements, and Warner-Lambert's
resulting right to reclaim Pfizer's interest in and value derived from
Lipitor(R), it is clear to us that Pfizer is seeking to acquire
Warner-Lambert in an environment that fundamentally undervalues
Warner-Lambert and overvalues Pfizer.
To confirm our conclusion that Pfizer is in material breach,
Warner-Lambert has brought its counterclaim. We know how Pfizer will
respond. While we were reviewing Lipitor(R) matters, which we publicly
acknowledged, Pfizer rushed to court. It filed a suit claiming that it
supposedly was released from the standstill by the AHP transaction and that
Warner-Lambert had supposedly breached some sort of obligation to notify
Pfizer in advance of discussions between Warner-Lambert and another party
regarding a possible business combination. In fact, in asserting it was
released from the standstill agreement, Pfizer repeatedly has misstated the
terms of that agreement. It continually fails to mention in court papers
and in its public statements the actual language -- that the standstill
only releases Pfizer in connection with a business combination between
Warner-Lambert and a third party "if such third party is the acquiring
party." Clearly that is not the case in Warner-Lambert's merger of equals
with AHP -- in which, among other things, Warner-Lambert's shareholders
will own approximately 50% of the combined company, Warner-Lambert's
directors will be 50% of the combined board, and the combined company's
senior management will be drawn from both Warner-Lambert and AHP, with the
chief executive officer coming from Warner-Lambert and reporting directly
to the board. As to Pfizer's assertion of required advance notice of the
discussions with AHP, there is simply nothing in the standstill agreement
which requires this. The assertion is nonsense.
Nonetheless, given the value of Lipitor(R), we are sure that
Pfizer will contest, by every means possible, our conclusion regarding its
material breach of the agreements and our counterclaim. In that regard, we
expect that Pfizer will, among other things, try to persuade you that our
lawsuit is somehow an entrenchment device. But the louder Pfizer protests
- -- and we expect its protests to be loud -- the more serious we presume it
understands the merits of our counterclaim to be. Pfizer's anticipatory
suit, and clear misstatement of a key contract term, already seem to
underscore its concern. And it is difficult to see why Pfizer should expect
to continue to receive the fruits of the Lipitor(R) agreements after having
acted in clear breach of its obligations under them.
The real point is that if the court agrees with our
position, and Warner-Lambert terminates the agreements as a result of these
breaches, there is no doubt that very substantial value will accrue to you,
the owners of Warner-Lambert. In that regard, we want to assure you that
before asserting this counterclaim we satisfied ourselves that the
marketing of Lipitor(R) would not suffer. Internally, and together with
consultants and agencies, Warner-Lambert has already started detailed
planning to be prepared to take over sole promotion of Lipitor(R),
including all field-, office-and R&D-based programs. These activities have
already begun with respect to all major territories of the world.
Pending a determination by the court, the Lipitor(R)
agreements continue in effect. However, if the court rules in
Warner-Lambert's favor, upon termination, Warner-Lambert would have no
further obligation to make payments to, or share revenues with, Pfizer with
respect to Lipitor(R).
Obviously, this Lipitor(R) situation did not exist when our
merger of equals with AHP was negotiated. Because of the approximately 50%
equity participation of Warner-Lambert shareholders in the combined
company, they will benefit at least to that extent from the value
enhancement that will result if our Lipitor(R) claim is confirmed and the
merger approved. In addition, AHP has informed Warner-Lambert that it is
prepared to work with Warner-Lambert to provide a mechanism, consistent
with the Warner-Lambert/AHP merger agreement, for fairly allocating to
Warner-Lambert's shareholders additional value ultimately created by the
recovery of the marketing rights to Lipitor(R), and Warner-Lambert intends
to pursue discussions in that regard. Whatever adjustment, if any, is made,
Warner-Lambert shareholders will have the right to vote on the AHP
transaction based on full information regarding Warner-Lambert's Lipitor(R)
claim. In this regard, we intend to ask for an early trial and hope to have
the matter resolved before our shareholders vote.
As we hope has been amply demonstrated, our objective is to
create value for you, and this counterclaim serves that end. In this
regard, we want to be clear with you that, despite Warner-Lambert's right
to do so, it is not seeking through the counterclaim, by injunction or
otherwise, to prevent Pfizer from making whatever offer it wishes. But any
such offer should be based on a reallocation of most of the future value of
Lipitor(R) to Warner-Lambert, because of Pfizer's contract breaches.
SOME FINAL THOUGHTS
This is a long letter. And it takes you through quite a bit
of history and detail about the entire process that led to where we and you
are today. But that history and detail is necessary to understand and
assess our conduct as a Board. This letter, hopefully, will give you an
informed basis to do so.
Let us sum up. For over a year we have been working hard to
develop a strategic path and a means to implement it that would, in our
best judgment, present the best value creation opportunity for
Warner-Lambert shareholders. We found this opportunity in the proposed
strategic merger of equals business combination with AHP. The transaction
terms put some constraints on third-party interest. But these were mutual
and necessary for us to agree to in order to sign a deal that already has
been enthusiastically recognized by the marketplace as a major value
creation event.
Although not consistent with our conscientiously developed
strategy, and presented in clear violation of its standstill and
confidential information use promises, we did not simply reject or ignore
Pfizer's overture. We were concerned, to be sure, that a real strategy and
value creation opportunity with AHP might be disrupted or lost. But, led by
Mr. de Vink, we concluded that a face-to-face meeting should take place,
and Mr. Steere should be asked what was on his mind. Pfizer could have come
forward with a real proposal then or subsequently and prior to our signing
with AHP. Instead, Mr. Steere presented at best a sales pitch, but no
proposal at all.
We had to make a choice. Should we sign a deal with AHP that
we believe is excellent for you, and which you will have an opportunity to
vote on, or should we lose that deal to pursue the possibility that there
might be a transaction with Pfizer, the terms and timing of which, and thus
the benefits to you, had never been made known to us. The one breach of
duty that we could see that might have occurred would have been if we had
failed to proceed with the AHP transaction. And, of course, our merger
agreement with AHP continues to permit us to consider third party proposals
(including proposals from Pfizer) which do not rest on self-imposed
conditions that cannot be met.
However, Pfizer wrongly complains about our conduct. This is
particularly remarkable in view of Pfizer's intentional and material breach
of provisions of the Lipitor(R) agreements that are intended to prevent
Pfizer from doing exactly what it is doing -- seeking to capture the value
of Lipitor(R) for itself at the expense of Warner-Lambert and its
shareholders.
We think that the facts and history speak for themselves --
and quite clearly. We are committed to act in your best interests to build
shareholder value --and will continue to do so.
We thank you for your time and support.
Sincerely,
/s/ Robert N. Burt /s/ William R. Howell
____________________________ _____________________________
Robert N. Burt William R. Howell
Chairman of the Board and Chief Chairman Emeritus
Executive Officer J.C. PENNEY COMPANY, INC.
FMC CORPORATION
/s/ Donald C. Clark /s/ LaSalle D. Leffall, Jr.
_____________________________ ________________________________
Donald C. Clark LaSalle D. Leffall, Jr., M.D.
Retired Chairman of the Board and Charles R. Drew Professor of Surgery
Chief Executive Officer HOWARD UNIVERSITY COLLEGE OF
HOUSEHOLD INTERNATIONAL, INC. MEDICINE
Professorial Lecturer in Surgery
GEORGETOWN UNIVERSITY
/s/ Lodewijk J.R. de Vink /s/ George A. Lorch
_____________________________ ______________________________
Lodewijk J.R. de Vink George A. Lorch
Chairman of the Board, President and Chairman of the Board and Chief
Chief Executive Officer Executive Officer
WARNER-LAMBERT COMPANY ARMSTRONG WORLD INDUSTRIES, INC.
/s/ John A. Georges /s/ Alex J. Mandl
______________________________ _____________________________
John A. Georges Alex J. Mandl
Retired Chairman of the Board and Chairman of the Board and Chief
Chief Executive Officer Executive Officer
INTERNATIONAL PAPER COMPANY TELIGENT, INC.
/s/ William H. Gray III /s/ Michael I. Sovern
______________________________ _____________________________
William H. Gray III Michael I. Sovern
President and Chief Executive Officer President Emeritus and Chancellor
UNITED NEGRO COLLEGE FUND Kent Professor of Law
COLUMBIA UNIVERSITY
President
SHUBERT FOUNDATION
EXHIBIT 99.2
WARNER-LAMBERT BOARD SENDS LETTER TO SHAREHOLDERS
BELIEVES SHAREHOLDERS SHOULD HEAR DIRECTLY FROM BOARD
REGARDING RECENT EVENTS
MORRIS PLAINS, NJ, December 2, 1999 -- The Board of Directors of
Warner-Lambert Company (NYSE: WLA) today said it is sending a letter to
Warner-Lambert shareholders addressing recent events regarding the
Company's proposed merger of equals with American Home Products
Corporation, and Pfizer Inc.'s efforts to acquire Warner-Lambert.
Warner-Lambert said that, in addition to mailing the Board's letter to
shareholders, it was filing a copy with the Securities and Exchange
Commission on a Current Report on Form 8-K, and a copy would be available
for review on the Company's website at www.warner-lambert.com. The Board
stated that shareholders are entitled to hear directly from the Board in
order to understand and assess its conduct.
The letter addresses, among other things:
o The Board's track record in creating shareholder value,
which includes the fact that from 1994 through the projected
year end 1999, Warner-Lambert's revenues have grown from
$6.4 billion to an estimated $12.8 billion, and the market
capitalization has increased 560% from $10.4 billion on
December 31, 1994 to $68.6 billion at October 31, 1999.
o The Board's decision to pursue a "merger of equals" business
combination with AHP was the product of a thoughtful, nearly
yearlong strategic review process, followed by a four month
period of consideration of and discussions and negotiations
with AHP.
o Pfizer's interest in acquiring Warner-Lambert was first
expressed, by letter, on October 25th to Warner-Lambert's
chairman, president and chief executive officer, Lodewijk
J.R. de Vink, who promptly brought it to the Board's
attention.
o This expression of interest was late in the process of
negotiations with AHP. Nonetheless - and contrary to
Pfizer's assertions - Warner-Lambert did not ignore
Pfizer's overture. Rather, Pfizer was asked what was on its
mind.
o Pfizer never made any specific proposal, despite having had
multiple opportunities to do so. Indeed, after being asked
what was on his mind at an October 27 meeting with Mr. de
Vink, Mr. Steere indicated that he didn't have specific
terms in mind for a Warner-Lambert/Pfizer transaction, that
he had not discussed a possible Warner-Lambert/Pfizer
transaction with the Pfizer board, and that Pfizer was also
pursuing another sizable acquisition and might not be able
to pursue both that acquisition and a Warner-Lambert
transaction at the same time.
o By November 3rd, the date of final consideration and action
by Warner-Lambert's Board:
o the AHP transaction terms were finalized and believed
by the Board, in its best judgment, to present an
excellent value creation opportunity for
Warner-Lambert shareholders,
o Pfizer had sent a second letter and made director to
director contacts with Warner-Lambert, but Pfizer
still presented nothing specific, only a sales pitch,
o AHP was unwilling to go forward if Warner-Lambert
held further discussions with Pfizer or refused to
include as part of the transaction the mutual
termination fee and stock option grant that AHP had
been demanding from the outset, and
o Warner-Lambert's Board had carefully considered and
understood the material terms of the proposed
transaction agreements with AHP, including the
potential accounting impact of the option grant to
AHP and the fact that a Pfizer director had told a
Warner-Lambert director that day that Pfizer's
inability to obtain pooling accounting would not be a
problem.
o Following public announcement on November 4th of the Warner-
Lambert/AHP merger of equals, Pfizer, in breach of material
provisions of its Lipitor(R)agreements with Warner-Lambert,
publicly made an acquisition proposal for Warner-Lambert
and, to further this effort, initiated two lawsuits against
Warner-Lambert and its directors and announced its intention
to seek to remove and replace Warner-Lambert's directors.
o In response to these actions, and after careful
consideration, Warner-Lambert's Board authorized a
counterclaim against Pfizer to reclaim the full value of
Lipitor for its shareholders based on Pfizer's November 4th
and subsequent breaches of the Lipitor(R)agreements. The
counterclaim was filed in Delaware Chancery Court on
November 29, 1999 and does not ask for injunctive relief to
prevent Pfizer from making any offer it wishes.
The Board's letter concludes as follows:
"We had to make a choice. Should we sign a deal with
AHP that we believe is excellent for you, and which you will have
an opportunity to vote on, or should we lose that deal to pursue
the possibility that there might be a transaction with Pfizer, the
terms and timing of which, and thus the benefits to you, had never
been made known to us. ... And, of course, our merger agreement
with AHP continues to permit us to consider third party proposals
(including proposals from Pfizer) which do not rest on self-imposed
conditions that cannot be met.
"However, Pfizer wrongly complains about our conduct.
This is particularly remarkable in view of Pfizer's intentional and
material breach of provisions of the Lipitor(R) agreements that are
intended to prevent Pfizer from doing exactly what it is doing --
seeking to capture the value of Lipitor(R) for itself at the
expense of Warner-Lambert and its shareholders.
"We think that the facts and history speak for
themselves - and quite clearly. We are committed to act in your
best interests to build shareholder value - and will continue to do
so.
"We thank you for your time and support."
Warner-Lambert is a global company devoted to discovering,
developing, manufacturing and marketing quality pharmaceutical, consumer
health care, and confectionery products. Its central research focus is on
heart disease, diabetes, disorders of the central nervous system and
women's health care. In 1999, its revenues are expected to exceed $12
billion and the company will invest more than $1.2 billion in research and
development. It employs more than 43,000 people worldwide.
Statements made in this press release that state "we will," "we
expect," or otherwise state Warner-Lambert's predictions for the future are
forward-looking statements. Actual results might differ materially from
those projected in the forward-looking statements. Additional information
concerning factors that could cause actual results to materially differ
from those in the forward-looking statements is contained in
Warner-Lambert's annual report on Form 10K-A for the year ended December
31, 1998 filed with the U.S. Securities and Exchange Commission.
Contact:
Media Contact:
Carol Goodrich (973) 540-3620
or
Investor Relations Contacts:
George Shields (973) 540-6916
John Howarth (973) 540-4874
EXHIBIT 99.3
WARNER-LAMBERT ISSUES RESPONSE TO PFIZER INC COMPLAINT
MORRIS PLAINS, NJ -- Nov. 23, 1999 -- Warner-Lambert Company (NYSE: WLA)
issued the following statement in response to a complaint filed today by Pfizer
Inc:
Pfizer continues to rush to the courthouse for relief but persists in
failing to present the true underlying facts or cogent claims.
Among other things -- and importantly -- Pfizer consistently misstates the
actual terms of the parties' standstill agreement. Pfizer repeatedly claims
that the standstill agreement is at an end if "Warner and a third party
reach an agreement with respect to a business combination." BUT THIS IS NOT
WHAT THE AGREEMENT SAYS. The agreement is specific that a business
combination with a third party does not result in any termination unless
"such third party is the acquiring party." In other words, the standstill
ends only if Warner-Lambert is being ACQUIRED by the third party. Pfizer
knows -- and we know -- that our business combination with American Home
Products is a "merger of equals" with no acquiring party.
Pfizer's latest complaint also asserts that Pfizer must be notified of
discussions between Warner-Lambert and a potential other party to a
business combination. This assertion has absolutely no basis in the
standstill agreement.
Pfizer's studied avoidance of the actual provisions of the Lipitor
agreements, of which the standstill agreement is part, and its rush to the
courthouse makes one thing clear --Pfizer recognizes that there is a real
issue about its compliance with those agreements. And Pfizer has a problem
with that simple fact.
As Warner-Lambert has said consistently, we are studying the Lipitor
agreements and will consider actions that will best serve the interests of
Warner-Lambert's shareholders.
Contact:
Media Contact:
Carol Goodrich (973) 540-3620
or
Investor Relations Contacts:
George Shields (973) 540-6916
John Howarth (973) 540-4874
EXHIBIT 99.4
WARNER-LAMBERT PLEASED WITH DELAWARE COURT OF
CHANCERY DECISION TO EXPEDITE HEARING
MORRIS PLAINS, N.J. -- Nov. 19, 1999 -- Warner-Lambert Company said today
it was pleased with the decision of the Delaware Court of Chancery to
schedule a January 24, 2000 hearing of Pfizer Inc's lawsuit challenging
certain provisions of the Company's merger agreement with American Home
Products.
The Courts' decision to expedite the legal process follows Warner-Lambert's
November 9, 1999 request of Pfizer to commit to move the proceeding along
as promptly as possible in order to resolve the uncertainty that Pfizer's
litigation has created.
Contact:
Warner-Lambert Company
Media:
Carol Goodrich (973) 540-3620
or
Investor Relations:
George Shields (973) 540-6916
John Howarth (973) 540-4874
