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Major merger in drug industry

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NEW YORK -- American Home Products Corp. and Warner-Lambert Co. are merging in a $71 billion deal that would create the world's largest prescription drugmaker as well as non-prescription products like Advil, Certs and Chapstick.

The deal announced Thursday between the two New Jersey companies would be the biggest to date in the drug industry and among the biggest deals ever.American Home is behind the household products Advil, Robitussin and Chapstick and the top-selling hormone replacement drug Premarin, the world's most prescribed medicine.

But it is struggling as a result of lawsuits and product safety questions and has been seeking a merger partner after two previous deals collapsed.

Warner-Lambert makes Certs mints, Schick razors and the blockbuster cholesterol drug Lipitor. It has been the nation's fastest-growing drug company for the past two years.

The new company will be called AmericanWarner Inc.

"They both need more depth in research and distribution and a stronger global presence," said Linda Miller, portfolio manager for the John Hancock Global Health Sciences Fund, which owns about 150,000 shares of each company.

The stocks of both companies rose Thursday after the deal was announced. Shares of other drug makers also were higher as investors anticipated a new round of dealmaking.

The merger will be structured as a stock swap. For each share in Warner-Lambert investors own, they will receive 1.4919 shares of American Home, worth about $86.29. Each company will name 10 members of the new board of directors.

American Homes' top executive, John Stafford, 62, will be chairman of the combined firm for 18 months. Warner-Lambert's Lodewijk J.R. de Vink, 54, will be CEO immediately and will assume the chairman's position after Stafford steps down.