Speaking yesterday at the JP Morgan Healthcare Conference in San Francisco, Pfizer CEO Ian Read and his Allergan counterpart Brent Saunders gave investors some more insight into the future of the companies if the deal closes, telling eager-eared investors a decision whether or not to split the mega-entity will be taken two years from now.
“Clearly, we are thinking about what would the potential two companies look like, and so we are structuring for that now and creating that infrastructure and creating that ability so that we have that optionality,” said Read.
“To do the split, you’d have to see that the two businesses would function well within the company. You’d have to believe they could function on their own. You would have to believe the TARP value and you have to believe it’s in a tax efficient way while unlocking the TARP value.”
Saunders added a split would be reliant on “maximizing value for shareholders and funds and if there is a right time to unlock it.”
Synergies
At the time the merger was announced, Pfizer said it expected to find around $2bn in cost-saving synergies, a point the two CEOs discussed further yesterday.
“When you add the size of Pfizer’s infrastructure globally, we should expect revenue synergies there,” said Saunders. “I think also in the US, we should expect revenue synergies as we see some overlap on the common- targets and therapeutic areas, and we need to make sure that we both get the synergies.”
Read added the $2bn figure reflected “the lack of overlap” between the two companies as well as the way the firms have managed the costs of previous M&A integrations.
Pfizer has managed a megamerger in the past through the $68bn addition of Wyeth, and has also recently added Hospira for $17bn.
Allergan, meanwhile, has had its fair share of mergers, and incorporates the businesses of Actavis ($66bn deal), Forrest ($25bn), Warner-Chilcott ($8.5bn) and Watson ($5.5bn).
“If you started at whether it be Watson or Forrest, and you work with us, you’ve gone through a lot of change,” said Saunders. “Our teams are, I guess, more accustomed to change.”
The transaction is expected to close in the second half of 2016.