Pfizer Sells Hospira's Device Business To ICU For $1B
Pfizer has entered into a definitive agreement to sell off Hospira’s infusion pump and medical device businesses to ICU Medical for $1B in cash and stock. Hospira’s infusion systems are complementary to ICU’s existing portfolio, and the combination of offerings will create a leading pure-play infusion therapy company with a significantly broader global reach, said ICU CEO Vivek Jain.
Rumors of a potential Hospira split-up began last January, and Bloomberg reported that the move would streamline Pfizer’s pharmaceutical business as the company geared up for a $160 billion mega-merger with Allergan – a deal that was later scrapped. Analysts at Bloomberg speculated at the time that Hospira’s portfolio of infusion pumps, solutions, and medical devices could fetch upwards of $2 billion.
Pfizer purchased Hospira in 2015 for $17 billion, with the expectation that Hospira’s generics and biosimilars would drive long-term sustainable growth for the company. In May, Pfizer reportedly began taking bids for Hospira’s devices segment, and Bloomberg cited reports of Fresenius and Smiths Group Plc placing bids.
ICU Medical specializes in infusion solutions and needle-free intravenous technology, as well as disposable products in oncology and critical care. Under the terms of the $1 billion deal with Pfizer, ICU Medical will pay $600 million in cash and an additional $400 million in ICU stock, giving Pfizer a 16.6 percent stake in the company, according to a press release.
ICU Medical and Hospira first signed a distribution agreement in 1995; in 2011 that deal was extended through 2018, allowing Hospira to sell ICU’s needle-free technology with its infusion systems. Jain commented in a press release that the purchase of Hospira’s infusion business is the “natural evolution” of the partnership between the two companies. According to Jain, Hospira has been ICU’s biggest customer for over 20 years.
“By acquiring the Hospira Infusion Systems business, currently our largest single customer, we create a pure-play infusion business with the focus and scale to compete globally, eliminate our single customer concentration issue, and have a significant value creation opportunity as a much larger company,” said Jain in the press release.
Chris Lewis, an analyst for Roth Capital Partners, told Reuters, “ICU has been building a war chest for acquisitions and finally delivered on the M&A front” with the deal to acquire Hospira’s medical devices. Pending regulatory approval, both companies expect the deal to close in the beginning of 2017.
Pfizer walked away from the merger with Allergan in April, a deal that would have slashed Pfizer’s corporate tax rate and moved its headquarters to Ireland. Reuters reported that that deal was killed by new regulations proposed by the U.S. Treasury Department and efforts by the White House.