Hospira shareholders will receive $90 a share in cash, a 39% premium to Wednesday’s close. Shares surged 36% to $88.10 premarket. The stock’s previous high, set earlier this year, was $66.56 a share.
Pfizer Chief Executive Ian Read had said the company was open to doing a big deal after being rebuffed last year in its $120 billion bid to buy AstraZeneca PLC. Like its rivals, Pfizer is looking for new avenues of growth as key drugs lose patent protection.
Pfizer noted both sterile injectables and biosimilars are large and growing categories. The global marketplace value for generic sterile injectables is estimated to be $70 billion in 2020, while the marketplace for biosimilars is estimated to be about $20 billion by that time.
Hospira is one of the first U.S. drug makers providing biosimilars to patients in Europe and Australia.
The companies tagged the enterprise value of the deal, which likely includes the assumption of debt, at about $17 billion.
The acquisition is expected to immediately add to earnings upon closing, with 10 cents to 12 cents a share in the first full year after close and growing thereafter.
The deal also comes as Hospira was facing challenges to a key business. Over the past couple years, manufacturers of injectable drugs have benefited from product shortages that made it possible to raise prices. The shortages were often attributed to tougher inspections by the U.S. Food and Drug Administration, but these typically take about two years to resolve, suggesting the latest cycle of price hikes may be nearing an end.
Hospira emerged last year as a bidder for Danone SA’s medical-nutrition unit, amid a flurry of so-called inversion deals designed to sidestep U.S. taxes. The deal never occurred, and Danone in December said it would keep its medical-nutrition business.
Hospira was expected to report its 2014 results next week. For the year, analysts are expecting revenue to rise 8% to $4.44 billion and net income of $421.48 million, according to Thomson Reuters. Pfizer, meanwhile, last month reported a 4% decline in 2014 revenue to $49.6 billion and a 58% drop in net income to $9.14 billion.
Pfizer expects to finance the deal through a combination of cash and debt and expects the acquisition to lead to $800 million in annual cost savings by 2018. The deal, which is expected to close in the second half of this year, is subject to approval from regulators and Hospira’s shareholders.
No comments:
Post a Comment