Pfizer steps up M&A with $17bn deal to buy Hospira

Pfizer agreed on Thursday to acquire Hospira, a provider of injectable drugs and biosimilars, for about $17bn in it's first big deal since it failed to buy AstraZeneca last year.

The New York-based company agreed to pay Hospira shareholders $90 a share in cash, a 39 per cent premium to Wednesday's closing price.

Ian Read, Pfizer's chief executive, said that the transaction will boost revenues and growth for the group's established pharmaceutical business.

"The proposed acquisition of Hospira demonstrates our commitment to prudently deploy capital to create shareholder value and deliver incremental revenue and EPS growth in the near-term," he said.

For Pfizer, the acquisition provides an alternative outlet for some of its big cash reserves after a futile search for overseas targets in the past year.

It is the group's first big deal since its failed £69.4bn takeover approach for AstraZeneca of the UK last May. Since then, Pfizer has been linked with a wide range of other assets as it seeks new sources of growth.

The decision to make a big buy in the US follows a White House clampdown on so-called "tax inversions" of the kind that would have seen Pfizer move its tax home to the UK had a deal with AstraZeneca gone through.

Mr Read has since said he believes inversion are still possible but less attractive after a Treasury rule change made it harder to make tax savings by moving overseas.

The deal continues a year-long mergers and acquisitions spree across the pharmaceuticals sector as drugmakers have sought to increase efficiency and growth. The 39 per cent premium to Hospira stock's close on Wednesday highlighted the hefty valuations required to secure assets.

Mr Read said earlier this week that Pfizer had a "biased toward deals with the potential for creating value in the near term" rather than investing in riskier assets.

Hospira is the world's largest producer of generic injectable drugs and is also building a strong position in the important new market for biosimilars - medicines that aim to mimic biological treatments at a lower price.

Biosimilars are expected to grow into a multibillion-dollar global market as the first generation of blockbuster biological drugs - which are derived from living cells rather than chemicals - begin to lose patent protection.

Hospira was the first US company to launch a biosimilar with an imitation of Johnson & Johnson and Merck & Co's Remicade arthritis drug, introduced in Europe last year.

The company, based in Lake Forest, Illinois, has a workforce of 19,000 and produces treatments for conditions ranging from cancer to pain. It reported sales of $1.15bn in the three months to the end of September, its most recent quarter, and gross profits of $431m.

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