Johnson & Johnson said Monday it will pay $16.6 billion in cash for drugmaker Pfizer’s consumer healthcare unit, adding brands like Listerine and Neosporin to J&J’s consumer arsenal.

J&J, whose products already include such household names as Band-Aid, Tylenol, Splenda, and Neutrogena, will also gain U.S. rights to over-the-counter sales of Pfizer allergy medication Zyrtec, once the drug’s patent expires.

“[This is] an important milestone in Johnson & Johnson's history,” CEO William Weldon said in a conference call.

The deal is another step in Johnson & Johnson’s quest to become the global leader in the consumer, pharmaceutical, and medical devices markets. It also ends speculation about J&J’s plans for the funds the company set aside during its unsuccessful bid for heart device maker Guidant in January (see Guidant Picks Boston for $27B).

Shares of Johnson & Johnson dipped $1.11 to $60.21. Pfizer stock climbed $0.37 to $23.01.

Expanding Market Reach

Pfizer Consumer Healthcare joins a string of acquisitions by Johnson & Johnson including DePuy, Neutrogena, and Centocor.

“This acquisition also provides transformational opportunities for our [over-the-counter] business by nearly doubling our size and solidifying our position as the worldwide leader in nonprescription medicines,” said Colleen Goggins, chairwoman of the company’s consumer unit.

Johnson & Johnson will be positioned to tap into a burgeoning market for personal healthcare products both in developed and in developing countries where the rise of a middle class has created more disposable income.

“We see unlimited opportunities to draw upon the strengths of our combined organizations to help improve consumer health and enhance shareholder value,” Ms. Goggins said.

Pfizer’s products will give Johnson & Johnson the lead in several new categories, including mouthwash and smoking cessation. The addition of Listerine, alone, will propel the company’s oral care franchise into a more than $1-billion business and expand its presence in 60 countries.

Integration of the two businesses is estimated to cost $500 million to $600 million per year until the process is completed in 2009, said Johnson & Johnson CFO Bob Darretta.

Contact the writer: AWeinstein@RedHerring.com