Basics of the transaction
The Hospira (HSP)–Pfizer (PFE) transaction is a merger involving a cash payout of the consideration. These deals have a longer time frame than cash-tender deals, which can close in as little as 45 days.
Terms of the transaction
The following conditions need to be satisfied in order for the deal to close:
- Hospira shareholder vote
- Hart-Scott-Rodino antitrust filing
- other overseas antitrust approvals
- U.S. Securities and Exchange Commission approval of the proxy statement
Hospira has a non-solicitation agreement with a fiduciary out. This means that prior to shareholder approval of the transaction, if Hospira is approached by another suitor, it could discuss a merger with them. First, the Hospira board of directors would have to determine that such discussions could lead to a bona fide offer that would likely result in a higher bid for the company. Hospira is not permitted to shop itself around, however.
In the event that another bidder comes in and tops the Pfizer bid, and Hospira is unable to get shareholder approval, it will owe Pfizer a breakup fee of $500 million. The likelihood of another bidder coming in depends on whether Hospira ran a process to auction off the company or not. If they didn’t run a process, then it is possible that another suitor could be interested. You’ll usually find this information in the background section of the proxy statement.
Other merger arbitrage resources
For more analysis, read Merger arbitrage must-knows: A key guide for investors.