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Getting the Hospira–Pfizer merger deal done

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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.

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Terms of the transaction

Hospira shareholders will receive $90 per share once the deal closes. They’ll have no further interest in the merged company.

Conditions precedent

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
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Non-solicitation

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.

Breakup fee

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.

Other important merger spreads include Time Warner (TWC) and Comcast (CMCSA) as well as DIRECTV (DTV) and AT&T (T).

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