NEW YORK (CNNMoney.com) -- Pfizer announced Monday that it has signed a deal to acquire the smaller drugmaker Wyeth for $68 billion, and tens of thousands of job cuts will follow.

New York-based Pfizer, already the world's leading drugmaker, becomes even larger following the cash-and-stock deal with Wyeth, based in Madison, N.J.

The deal values Wyeth shares at $50.19 each, a nearly 15% premium to Friday's closing price. Pfizer agreed to pay $33 in cash and 0.985 share in Pfizer stock for each Wyeth share.

Pfizer spokesman Ray Kerins said the company is planning about 20,000 new job cuts and will close five manufacturing plants.

"We're going to do everything we can to improve on our revenues and maximize our performance," said Pfizer Chief Executive Jeffrey Kindler, in a Monday press conference.

Pfizer recently announced that it was cutting up to 8% of its research staff, or up to 800 jobs.

Pfizer said the deal would be financed through a combination of cash, debt and stock. The company said it is borrowing $22.5 billion from a consortium of banks.

The board of directors also decided to cut Pfizer's quarterly dividend in half to 16 cents a share.

Pfizer announced that it would ramp up its focus in treatments for Alzheimer's disease, inflammation, cancer, pain and psychosis, and continue to focus on vaccines and biotechnology.

"We want to become a leader in biotherapeutics and vaccines," said Kindler. "There is no other company that is such a perfect fit for those strategies."

Pfizer also reported a 90% plunge in quarterly net profit. The company said its diluted earnings per share plummeted to 4 cents in the fourth quarter, from 40 cents the prior year.

The company blamed a $2.3 billion charge to resolve allegations from federal prosecutors that it had promoted Bextra for uses not approved by the FDA. Bextra, an anti-arthritis drug, was pulled off the market after Merck's (MRK, Fortune 500) Vioxx was withdrawn in 2005.

Pfizer also reported a slight decline in fourth-quarter revenue to more than $12.3 billion, from nearly $12.9 billion the year before.

This is the first big merger since 2006, when the telecom giant AT&T (ATT) merged with BellSouth for $67 billion. After that deal, AT&T cut 10,000 jobs.

Miller Tabak analyst Les Funtleyder, author of "Healthcare Investing," said that Wyeth has a "decent pipeline" but with "nothing that immediately jumps out at me as blockbuster." Most promising, he said, is Wyeth's plan to roll out a new form of Prevnar, which combats meningitis and blood infections, with sales totaling $2.1 billion in 2008.

Daniel Ruppar, pharma and biotech analyst for Frost & Sullivan, said that Pfizer "needed to do some major purchase to expand their portfolio, because they have been doing a lot of cuts and trying to realign themselves. They may use this opportunity to take the best that they have, as well as try to pick the best from within the science structure at Wyeth."

Pfizer's (PFE, Fortune 500) stock price fell 10% in midday trading, while Wyeth's (WYE, Fortune 500) was little changed.

One of Pfizer's chief challenges is finding a replacement for the cholesterol-cutting Lipitor, the top-selling drug of all time. The drug's annual sales peaked at nearly $13 billion in 2006, but revenue will plummet when Lipitor's patent expires in 2011.

Correction: This story initially reported an inaccurate tally for Pfizer's job cuts.

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