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Why Pfizer Is Falling and Array Is Rising on Acquisition News


Jun. 17 2019, Updated 1:58 p.m. ET

Pfizer’s Array BioPharma acquisition

Today, Pfizer (PFE) announced its acquisition of Array BioPharma (ARRY). Pfizer will acquire Array BioPharma for $48 per share, which is a premium of roughly 62% over the stock’s June 14 closing price. The deal values Array Pharmaceuticals at an enterprise value of ~$11.4 billion. Pfizer expects to fund the transaction primarily via debt and existing cash. Pfizer expects to complete the transaction in the second half of the year.

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According to Pfizer, the acquisition “sets the stage to create a potentially industry-leading franchise for colorectal cancer alongside Pfizer’s existing expertise in breast and prostate cancers.” The company added, “The closing of the tender offer is subject to customary closing conditions, including regulatory approvals and the tender of a majority of the outstanding shares of Array common stock (on a fully-diluted basis).” Meanwhile, while Array BioPharma is soaring today to reflect the massive premium that Pfizer has offered, Pfizer is trading with a small loss.

EPS dilutive

Pfizer expects the Array Biopharma acquisition to be dilutive in 2019 and 2020. The company expects adjusted EPS dilution of $0.04–$0.05 in 2019 and 2020. Pfizer expects the transaction to be EPS neutral in 2020 and EPS accretive in 2021. Pfizer gave 2019 midpoint EPS guidance of $2.93 earlier this year. Looking at the company’s guidance, the transaction would lead to EPS dilution of ~1.5% this year.

Pfizer has received a “strong buy” ratings from two analysts, while seven analysts have given it “buy” ratings. Six analysts have given it “hold” ratings, while the remaining analyst polled by Thomson Reuters has given it a “strong sell” rating. Pfizer has a mean consensus price target of $45.57, which represents a potential upside of ~7.5%.


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