Pfizer to Buy King Pharmaceuticals for $3.6B

Pfizer to Buy King Pharmaceuticals for $3.6B

Pfizer to Buy King Pharmaceuticals for $3.6B

Pfizer Inc., the world's largest pharmaceutical company by revenue, agreed to buy King Pharmaceuticals Inc. for $3.6 billion, the latest acquisition in an industry facing patent-expiration woes.

The deal comes a year after Pfizer bought Wyeth for $68 billion, a deal which unleashed a run of merger activity in the pharmaceutical industry. Big drug makers face the expiration of patents on many flagship drugs, which opens the doors for much cheaper generic versions of those drugs to enter the market.

Under the agreement, Pfizer will pay $14.25 per share for King, a 40% premium to Monday's closing price. King's stock through Monday was down 17% this year as the Bristol, Tenn., company has been struggling to find a replacement for its once-best-selling Altace blood-pressure treatment, whose sales plunged due to generic competition. More recently, the Skelaxin pain killer also became subject to generic competition.

But King's portfolio will add to Pfizer a prescription pharmaceutical business focused on delivering new formulations of pain treatments, an emergency drug delivery business that developed the EpiPen and an animal health business.

The companies expect to close the deal around year's end. Pfizer anticipates the acquisition boosting annual per-share profit slightly starting next year while yielding cost savings of at least $200 million that are expected to be realized by the end of 2013.

Fitch Ratings cut its outlook on Pfizer to negative earlier this month, saying the effects of its coming patent expirations on revenue and margins are likely to be worse than expected. Pfizer has seen strength lately, with revenue boosted by the Wyeth acquisition.