Updated from 11:21 a.m. EST

Pfizer ( PFE - Get Report) said Monday it had reached a definitive agreement to acquire rival drugmaker Wyeth ( WYE) in a cash-and-stock transaction currently valued at $50.19 a share, or a total of about $68 billion.

The acquisition price is a 14.7% premium to Wyeth's closing stock price Friday of $43.74. Pfizer shares closed last week at $17.45, but they were falling 11.1% to $15.22 in morning trading Monday. Wyeth was down 0.9% to $43.37.

The boards of both companies approved the merger. Acquiring Wyeth helps Pfizer, already the world's biggest pharmaceuticals maker, diversify and become less-dependent on individual drugs, while adding strength in biotech drugs, vaccines and consumer products.
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"The combination of Pfizer and Wyeth provides a powerful opportunity to transform our industry," Pfizer Chairman and CEO Jeffery B. Kindler said in a statement. "It will produce the world's premier biopharmaceutical company whose distinct blend of diversification, flexibility, and scale positions it for success in a dynamic global health care environment."

The announcement from the companies confirms reports from The New York Times and The Wall Street Journal that Pfizer, the maker of Lipitor and Viagra, was working over the weekend to finish financing for the acquisition.

Dutch biopharmaceutical company Crucell ( CRXL), meanwhile, announced Monday that Wyeth has withdrawn from discussions regarding a potential combination of the two companies. It was reported earlier this month that Wyeth was in preliminary talks to acquire Crucell in a deal that valued Crucell at more than $1.35 billion.

Meanwhile, Pfizer reported a 90% decline in fourth-quarter net income. The company had net income of $266 million, or 4 cents a share, in the period ended Dec. 31, compared with earnings of $2.7 billion, or 40 cents a share, a year earlier. Earnings were hurt by a charge to resolve investigations into off-label promotional practices.

Pfizer also said it plans to cut its workforce by about 10%, reduce the number of manufacturing sites to 41 from 46, and slash its dividend. The drugmaker also cut its forecast for 2009 earnings.

Revenue in the fourth quarter fell 4% to $12.4 billion from $12.9 billion a year earlier.

Excluding about $2.3 billion in legal charges for investigations into off-label marketing practices, profit rose to 65 cents a share, Pfizer said, topping the estimate of analysts surveyed by Thomson Reuters of 59 cents a share.

Wyeth also released its results, saying it earned 78 cents a share in the fourth quarter, before items were factored in. Revenue fell to $5.35 billion from $5.76 billion a year earlier. Analysts were expecting a profit of 79 cents a share and sales of $5.79 billion.

The news of the Wyeth agreement effectively puts an end to speculation that Pfizer might make a move on one of the big biotech companies such as Amgen ( AMGN - Get Report), Biogen Idec ( BIIB - Get Report) or Gilead ( GILD - Get Report), but it will also likely keep M&A as a front-and-center topic in the drug sector.

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