Pfizer to buy Hospira for $17 billion

BIOPHARMACEUTICAL giant Pfizer Inc. (NYSE: PFE) and Hospira, Inc. (NYSE: HSP) have entered into a definitive merger agreement under which Pfizer will acquire Hospira, the world’s leading provider of injectable drugs and infusion technologies and a global leader in biosimilars, for $90 a share in cash for a total enterprise value of approximately $17 billion. 

 

The transaction is expected to significantly enhance the Global Established Pharmaceutical (GEP) business of Pfizer, and be accretive by $0.10 - $0.12 per share for the first full year following the close of the transaction. GEP’s branded sterile injectables, including anti-infectives, anti-inflammatories and cytotoxics, will create a leading global sterile injectables business.

 

A growing revenue stream and a platform for growth will come from an expanded portfolio of sterile injectable pharmaceuticals, composed of Hospira’s broad generic sterile injectables product line, including acute care and oncology injectables, with a number of differentiated presentations, as well as its biosimilars portfolio. 

 

Pfizer also said it will use its existing commercial capabilities, global scale, scientific expertise and world class development capabilities to significantly expand the reach of Hospira products (which are distributed primarily in the United States) to Europe and key emerging markets, where GEP has a significant presence.

 

"The addition of Hospira has the potential to fundamentally improve the growth trajectory of the Global Established Pharmaceutical business, vault it into a leadership position in the large and growing off-patent sterile injectables marketplace by combining the specialized talent and capabilities of both companies, including enhanced manufacturing, and advance its goal to be among the world’s most preeminent biosimilars providers," said John Young, group president, Pfizer Global Established Pharmaceutical business. 

 

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. The global marketplace for biosimilars is estimated to be approximately $20 billion in 2020.

 

"The Pfizer-Hospira combination is an excellent strategic fit, presenting a unique opportunity to leverage the complementary strengths of our robust portfolios and rich pipelines," said Hospira CEO F. Michael Ball.

 

Pfizer expects to finance the transaction through a combination of existing cash and new debt, with approximately two-thirds of the value financed from cash and one-third from debt. In addition, Pfizer anticipates the transaction to deliver $800 million in annual cost savings by 2018.

 

Subject to customary closing conditions, including regulatory approvals in several jurisdictions and approval of Hospira's shareholders, the transaction is expected to close in the second half of 2015.

 

Pfizer's financial advisors for the transaction were Guggenheim Securities, J.P. Morgan and Lazard, with Ropes & Gray LLP acting as its legal advisor and Clifford Chance LLP advising on international regulatory matters. Morgan Stanley served as Hospira’s financial advisor, while Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates served as its legal advisor.