Pfizer (PFE) announced plans to buy injectable generics & biosimialar developer Hospira (HSP) at $90/share, for an enterprise value of $17 billion. Hospira closed Wednesday at $64.80. The deal will be acrettive in the first full year after closing, said Pfizer, which fits with the company’s goal of creating near-term shareholder value.
Hospira’s is an established business, thus Pfizer may still be casting around for ways to shore up its (arguably) lacking pipeline. Many analysts and investors expect Pfizer to seperate its commercial business from the pipeline in a near-term “breakup.”
The deal is not a major surprise to those who have been watching Pfizer attempt to improve its business outlook in the last two years, most recently with the bungled purchase of AstraZeneca (AZN) last summer. The Hospira deal suggests Pfizer won’t be buying Actavis (ACT) either, another large generic developer with whom Pfizer was rumored to be in discussions in late 2014.
By comparison, consensus for Hospira’s 2015 revenue is $4.5 billion, whereas analysts expect the division into which Hospira will fit at Pfizer, its Global Established Pharmaceutical business, will do around $25 billion. The deal will be accretive ($0.10-0.12 per share) in the first full year following its completion.
Pfizer is funding the acquisition with a combination of two-thirds cash & one-third new debt, and expects the transaction to produce $800 million in cost savings annually by 2018.
