Pfizers acquisition of Hospira, announced 3rd September 15
sector
value
financing
targets advisors
bidders advisors
pharmaceuticals
$17bn
cash (67%) and debt (33%)
Morgan Stanley
JP Morgan, Lazard
Pharmaceutical giant Pfizer have announced they
have acquired the worlds leading injectable drugs provider Hospira, in a deal valued at $17 billion.
provide an alternative outlet for some of Pfizers
big cash reserves after an unsuccessful search for overseas targets.
The acquisition, announced in February this year,
cleared the final regulatory hurdles in September, paving the way for the worlds second-largest drug company to acquire the Illinois-based hospitalfocused drug maker.
The global marketplace value for generic sterile
injectables is estimated to rise to $70 billion by 2020, with the global marketplace for biosimilars estimated to be approximately $20 billion by that time, leading to John Young, Pfizers group president for the firms GEP business, to express excitement at the possibility to combine Hospiras expertise and key talent with that of Pfizer to create a leading global business that will deliver an even broader portfolio of important and life-saving sterile injectable medicines to patients around the world, combining the specialized talent and capabilities of both companies, including enhanced manufacturing, and advance its goal to be among the worlds most preeminent biosimilars providers.
The move is in keeping with Pfizers current
business make-up, which is largely built up through a series of giant acquisitions, and is seen as a safer and less controversial transaction than the attempted $110bn approach for AstraZeneca last year. It was not without cost for Pfizer though, for the company who make drugs such as Celebrex, Prevnar and Lyrica, were forced by regulators to divest of some sterile injectable drugs Acetylcysteine, Clindamycin, Voriconazole and Melphalan which they feared would harm U.S. competition. Despite these heavy sacrifices, Hospira's portfolio of sterile injectable treatments and biosimilar drugs is seen to complement Pfizer's broad pharma offerings, and thus Pfizers CEO, Ian Read, was still clearly delighted with the move, saying it demonstrated the firms commitment to prudently deploy capital to create shareholder value and deliver incremental revenue and growth in the near-term. Read cited Hospira as a good call due to its business aligning well with our new commercial structure and is an excellent strategic fit to drive greater sustainability for our Global Established Pharmaceutical business over the long term. Hospira, meanwhile, who boasted a market capitalisation of $10.7 billion before Pfizers approach, who themselves boast a market capitalisation of some $201 billion, will look to utilise Pfizers existing commercial capabilities, global scale and scientific expertise to significantly expand the reach of their products, which are currently only distributed primarily in the United States.
Analysts have reacted to the news in sceptical
fashion but saw it in keeping with Pfizers eventual strategy to split into two separate entities, with Jeffrey Holford of Jefferies LLC saying the deal was a strategic fit with GEPs move towards longer duration growth assets, but even more important is the potential multiple uplift it likely gives GEP if it is separated from Pfizer in 2017. We think this deal signals a firm intent to separate GEP in 2017 and leaves more firepower for further deals. The deal has been financed through a combination of existing cash and new debt, with approximately two-thirds of the value financed from cash and one-third from debt. Pfizer is paying $90 a share in cash, a nearly 40 percent premium, but the company anticipates this transaction to deliver $800 million in annual cost savings by 2018. In reaction to the news, the market priced Pfizer shares down by 3.5% in morning trading as the global markets continued to tumble, whilst Hospira shares similarly fell by -0.3%.
The deal for the worlds largest producer of generic
injectable medicines, Hospira, who currently stand in a strong position in a new category of drugs called biosimilars, which are lower-cost, more complex biological medicines that are harder to replicate after the patent expires, is also seen to Martin Li