Pfizer share price up, to purchase Hospira in $17 billion deal

Pfizer Inc agreed to acquire Hospira, provider of injectable drugs and infusion technologies, for around $17 billion, marking the drugmakers first big deal since its failed takeover of AstraZeneca.

Pfizer will pay $90 per Hospira share, the New York-based company said in a statement released on Thursday. The price represents 39% premium to the Illinois-based companys closing price on Wednesday. The announcement boosted Hospiras shares to an all-time high of $87.57 during early trading in New York.

Hospira generated $4 billion in sales in 2013, the figures compares with the $49.6 billion that Pfizer reported for the same period.

Following its rejected takeover bid from AstraZeneca last year, Pfizer said it is still interested in making a large deal. The agreement with Hospira comes at a time when Pfizer is looking for new ways to generate profits, like many peers, as companies are losing patent protection over their key drugs.

Chief Executive Ian Read projected that the acquisition will drive “greater sustainability” for the groups pharmaceutical business over the long term and boost revenues in the near-term with its products that will “significantly enhance” Pfizers existing portfolio.

Over the past year cash-rich Pfizer was looking for a possible buy overseas. However, it decided to obtain a domestic peer instead, after the US government significantly reduced the benefit of the so-called “inversion deals”.

The move from the White House came after its failed $120-billion acquisition of UKs AstraZeneca. If the deal went through Pfizer could have reduced its US tax bill by a substantial amount by moving its headquarters outside the states.

Pfizer may look for further purchases as the Hospira deals value is slightly more than half of the free cash the US giant had at the end of September.

Additionally, Pfizer said it would finance the deal with a mix of new debt and cash, with around two-thirds coming from its $33 billion cash pile.

The company projected that the acquisition will contribute between $0.10 and $0.12 to full-year earnings and also reflect in $800 billion in cost savings by 2018.

The agreement with Hospira, which has around 19 000 employees, is subject to regulatory approval and is expected to close in the second half of 2015. The deal also needs to be voted in favor of by Hospiras shareholders.

“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 Hospiras Chief Executive Michael Ball.

Pfizer gained 0.16% on Wednesday and closed at $32.07 in New York. On Thursday the stock edged up 3.06% to $33.05, marking a one-year increase of 7.81%. The company is valued at $202.06 billion.

According to the Financial Times, the 17 analysts offering 12-month price targets for Pfizer have a median target of $35.00, with a high estimate of $41.00 and a low estimate of $30.00. The median estimate represents a 9.14% increase from the last closing price.