Pfizer jolted investors and the industry by launching its offer just an hour after Warner-Lambert held a news conference to announce it had signed a merger agreement with American Home Products Corp and while the partners were still discussing their $72 billion deal on television. Pfizer's $80 billion all-stock offer is the biggest hostile bid ever. Pfizer followed it up by saying that it was suing to knock out `breakup' provisions in the just-announced merger plan.

A combined Pfizer and Warner-Lambert would have $28 billion in revenue and a $4 billion research budget, and annual cost savings could come to $1.2 billion. From the Pfizer side, its offerings would include such prominent drugs as Viagra, Zoloft and Norvasc.

Pfizer proposed to exchange 2 1/2 of its shares with a total value of $93.125-for each Warner-Lambert share. The offer was valued at more than $96 per Warner-Lambert share before Pfizer's stock slipped on news of the bid. American Home's stock also slipped, but Warner-Lambert's rose $6.18 to $90.Early Friday, Warner-Lambert rejected Pfizer's proposal, and said its board strongly believed the American Home transaction is best for the long-term interests of its shareholders, and that the decision was also based on the conditions and the provisions of Warner-Lambert's contract with American Home.

A person familiar with Warner-Lambert's thinking contended the Pfizer bid wasn't "a real proposal" because it was conditioned on the elimination of breakup-fee and other defensive provisions Warner-Lambert and American Home had adopted. Earlier Thursday, Warner-Lambert's chairman, Lodewijk JR de Vink, said he was "very surprised" by Pfizer's move. But Pfizer had been courting Warner-Lambert recently with a series of "Dear Lodewijk" letters from chairman William Steere, letters that grew increasingly urgent.Pfizer's bid seemed sure to rattle the pharmaceutical industry, even though the industry has been gearing up for consolidation, as aging CEO's mull their legacies, new-drug pipelines thin, and drug makers await the results of expensive forays into gene-based research. Even in this context, Pfizer's action is striking in its boldness and timing.

For the 63-year-old Steere, the move marks a sharp reversal of course. He has done more selling of assets in recent years than buying. He had long maintained that Pfizer had the scientific and marketing wherewithal to go it alone, and that doing a major merger would distract the company from its core mission.

-- The Wall Street Journal