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Pfizers acquisition of Hospira, announced 3rd September 15




targets advisors

bidders advisors



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

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
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.
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
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

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