Pfizer - Hospira

Deal Details:
On February 05,2 015, Pfizer Inc. (NYSE: PFE) and Hospira, Inc. (NYSE: HSP) announced that they 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

Premium: 

39% premium to closing price on February 4, 2015 i.e. ~$4.3 bn

Announced synergies: 

$800 million in annual cost savings expected by 2018 i.e. over three years: 50% by year one, 75% by year two, 100% by year three. More than half of these cost synergies are in SG&A, while of the remainder is primarily COGS and to a much lesser extent, R&D

Highly complementary and synergistic businesses -

1. Sterile Injectables: Brings together Pfizer's portfolio of leading branded off-patent Sterile Injectables with Hospira's leading generic sterile injectables business to create a leader in the attractive and growing off-patent sterile injectables segment

2. Biosimilars: Pfizer has best-in-class capabilities in monoclonal antibody development and Hospira adds significant marketed recombinant proteins, an attractive biosimilars pipeline, and broad commercialization experience in Europe

3. Commercial Footprint:  Pfizer's broad global infrastructure and reach in developed and emerging markets, strong hospital business, and medical and commercial capabilities will help accelerate Hospira's global expansion program for its pipeline of existing and new molecules

4. Manufacturing: Will combine Pfizer's world-class manufacturing capabilities, including high-quality sterile injectables and Biologics manufacturing, with Hospira's significant additional state-of-the-art sterile injectables capacity across multiple areas including vials, pre-filled syringes, and lyophilized products

My Bytes:

• Announced synergies translate to about 20 % of all costs of Hospira; ~50% of the SG&A costs and ~25% of COGS and R&D costs, based on financials for FY 2014
• Of the combined costs of Hospira and Pfizer as reported in 2014, announced synergies translate to about 2.2% of all costs, ~2.7% of the SG&A costs and ~1.9% of COGS and R&D costs.
• NPV of synergies is ~$4.5-6bn, more than the premium paid.

References:
Pfizer - Hospira - Investor Presentation
Pfizer - Hospira - Call transcript