Mergers and acquisitions always interest me because I like to see the structure of the deal - how much stock and cash are involved, who's acquiring who and why and also because such deals also tend to indicate economic strength or weakness. This morning, drug giant Pfizer (PFE) has announced plans to acquire King Pharmaceuticals (KG) for $3.6 billion in cash. Amazingly, this comes exactly a year since Pfizer's deal to acquire Wyeth last year for $68 billion closed.
Companies that are flush with cash - particularly those involved in health care related fields - are putting more money to work to grow their portfolio of products to cope with the sour economy. In acquiring King, Pfizer gains venerable products in Avinza, a pain drug, and EpiPen the well-known injection used to treat allergic reactions. Interestingly, pharmaceutical companies have worked hard on acquiring both established players (Pfizer buying Wyeth) and biotech firms who may have potential blockbusters waiting in the pipeline (Sanofi-Aventis bidding on Genzyme). Since bringing a new drug to market is quite costly, many times it's easier buying a biotech firm who's already involved in extensive clinical testing of their potential drugs.
This news may seem like your run of the mill big pharma deal, but it also shows that the most cash-flush companies are willing to put large amounts of capital on the line to better position themselves for an economic turnaround.
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