- Pfizer's current market price of around $32 is very attractive for long term investment.
- Pfizer shares are evaluated to include $2 towards the Upjohn unit at the current low prices.
- Pfizer is a growth play going forward.
- The 4.7%+ dividend yield at current prices is very attractive for a growth company.
Pfizer (PFE) has agreed with Mylan (MYL) to separate its generic drug business Upjohn and combine it with MYL to form a new company named Viatris. Viatris will be listed as an independent company going forward. The deal is expected to complete in the immediate next quarter. As part of the deal,
- Existing MYL shareholders will get 1 for 1 shares of Viatris
- 43% of Viatris shares will go to Mylan shareholders and 57% will go to Pfizer shareholders.
- Upjohn will raise a debt of $12 billion which will go to the books of Viatris while the cash will go to Pfizer as a foreclosure payment.
The execution of the deal is progressing as expected.
The price equation for Pfizer shareholders:
PFE and MYL shares have tanked in the market recently to attractive levels.
| Pfizer | Mylan | |
| Share Price 52 Week High | 44.56 | 23.11 |
| Share Price 52 Week Low | 27.88 | 12.75 |
| Current Market Price 25-June-2020 | 32.32 | 16.38 |
| Shares Outstanding (latest) in Millions | 5,555 M | 517 M |
| Market Cap (approximate based on CMP) in billions | $178.8 B | $8.3 B |
Mylan shareholders, at a 1:1 share swap ratio will get 517 million shares of Viatris (43% of Viatris) and Pfizer shareholders will get 685 million shares (57% of Viatris). This works out to a share entitlement ratio of 12.33 shares of Viatris for every 100 Pfizer shares. Viatris will then have a total of 1202 million outstanding shares when listed. Please note that Pfizer indicated an approximate 12 shares of Viatris for every 100 shares of Pfizer when the transaction gets executed.
The current price of Mylon shares at $16.38 can be safely assumed as that of Viatris shares at the current or similar market conditions, because (a) Upjohn and Mylon have similar generic business models and (b) Mylon shareholders get a 1:1 share swap in Viatris. PFE shareholders at 12:100 ratio will get $1.97 Viatris share value per PFE share. The same works out to $2.02 at 12.33:100 share ratio. I am going to assume $2 of Viatris share equivalent is built into the current market price of Pfizer. If PFE is bought at $32 per share, $30 is for the future PFE shares and $2 is for the Viatris share entitlement.
