The pharmaceutical giant announced Monday that, following an extensive evaluation, its board of directors and executive leadership team decided to keep the company’s current structure and not pursue a separation of Pfizer Innovative Health and Pfizer Essential Health into their own publicly traded entities at this time.
“With this decision, our two distinct businesses will remain separately managed units within Pfizer, which we believe is currently the best structure to continue to deliver on our commitments to patients, physicians, payers and governments, and to drive value for our shareholders,” stated Ian Read, chairman and chief executive officer of Pfizer. “We believe that by operating two separate and autonomous units within Pfizer, we are already accessing many of the potential benefits of a split — sharper focus, increased accountability and a greater sense of urgency — while also retaining the operational strength, efficiency and financial flexibility of operating as a single company as compared with operating as two, separate publicly traded companies.
“We will continue to generate the financial information necessary to preserve our option to split our businesses should factors materially change at some point in the future,” Read added.
Pfizer noted that both the Innovative Health and Essential Health units have delivered solid year-over-year performance over the past three years, as well as strong performance through the first half of 2016.
“When we first explored the trapped value question several years ago, market valuations of other companies suggested that our two businesses could potentially be worth more as separate companies than they are together in a single company,” according to Frank D’Amelio, executive vice president of business operations and chief financial officer. “However, over time, any potential gap between Pfizer’s market valuation and an implied sum of the parts [SOTP] market valuation has closed.
“In our analysis, we concluded that splitting into two companies at this time would not enhance the cash-flow generation and competitive positioning of the businesses and the operational disruption, increased costs of a split and inability to realize any incremental tax efficiencies would likely be value destructive,” D’Amelio explained.