Pfizer’s top two bidders may have both walked away from a consumer health deal last week, but that doesn’t mean the pharma giant doesn’t still have options.
On the contrary, it’s got one path left to unloading the unit, and it’s one the company’s plenty familiar with: a spinoff.
As Bloomberg notes, a spinoff would not only spare Pfizer the taxes it would have had to pay on sale proceeds, but spinning off the unit could take some debt off Pfizer’s hands, too. And the company, which executed a successful spinoff of animal health unit Zoetis in 2013, knows what it’s doing in that department.
Of course, Pfizer, which had reportedly been looking for $20 billion or more before GlaxoSmithKline and Reckitt Benckiser backed out of talks, could still decide to keep the division until a better buyer comes calling. The business is still growing—at a rate of between 2% to 4% per year—and the portfolio accounts for a significant chunk of its dividend.
Plus, the company has made clear that it doesn’t have an immediate need for cash. “I suppose if no one is prepared to pay their asking price, then why sell it?” Daniel Mahony, a partner with Polar Capital in London, said.
But with online retailers putting the squeeze on drugstores, waiting around isn’t necessarily such a great idea, some industry watchers contend.
“The world has changed,” UBS Group analyst Michael Leuchten told Bloomberg. “That means these businesses or assets probably won’t be able to fetch the multiples they have in the past.”