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Pfizer Inc. (PFE) to Seek More Modern Headquarters in Manhattan

pfizer (NYSE:PFE)

Pfizer Inc. World Headquarters are located where plenty of people pass by. The building lies in the Manhattan borough of New York. The largest U.S. drugmaker said yesterday that it aims to sell its world headquarters buildings in midtown Manhattan. This will happen by the end of 2017. Then, it will begin moving into more modern facilities in Manhattan no sooner than the first half of 2019. “This move is being driven by the significant investment that would be required to bring the buildings to modern standards”. This is what the firm said in a statement.

Pfizer Inc. goes on a Hunt for its Next Office Site

The firm’s spokeswoman Joan Campion said the firm notified employees of the plans on Wednesday. The drugmaker intends to lease rather than buy a new headquarters, she told Reuters. Their headquarters include two buildings in midtown Manhattan with about 1 mn square feet of space. The firm began occupying the buildings at 235 and 219 East 42nd Street in 1961. A newer complex would have more work space and room for collaboration, Campion said.

Pfizer NYSE:PFE

Pfizer, founded in 1849 in New York City’s borough of Brooklyn, said it has not yet chosen the new location. A large majority of headquarters-based employees will move to the more modern facility, the firm said. Some could be reassigned to other sites in the metropolitan area. The firm’s plans follow its decision in April to abandon its proposed $160 bn purchase of Botox-maker Allergan Plc. The deal would have moved the firm’s tax address to Dublin, thereby sharply lowering its effective tax rate. Pfizer terminated the deal after the U.S. Treasury proposed new regulations that would have removed many of the tax advantages.

Yesterday, Reuters also reported that Pfizer will sell its infusion business to ICU Medical and take a stake in it. The firm said yesterday that it would sell its global infusion therapy business to ICU Medical Inc. The deal will take place for $1 bn in cash and stock. It will give Pfizer a major stake in the smaller firm. Pfizer had acquired the hospital infusion system business through its $15 bn purchase in September 2015 of Hospira. This business has annual sales of about $1.2 bn. But the firm said in July that it was exploring the possible sale of the infusion products. This would be needed to focus on its core pharmaceuticals business.

“They’re not a strategic fit for Pfizer, which has been looking for a buyer,” said John Boris. John is an analyst with SunTrust Robinson Humphrey. Pfizer will receive $600 mn in cash and nearly $400 mn in newly issued shares of ICU Medical. This will give it a stake of about 16.6 percent in the firm. ICU Medical’s shares jumped 14 percent to a 52-week high of $143.59 in yesterday’s late afternoon trading. Pfizer shares slipped 0.9 percent, in line with declines for the drug sector. Chris Lewis, an analyst at Roth Capital Partners, is bullish about the deal. He said the addition of Hospira’s infusion pumps and intravenous solutions will be good for ICU Medical. The latter’s needle-free connectors and other intravenous accessories would then create a “pure play” infusion therapy firm. It will be offering a complete set of products.

“ICU has been building a war chest for acquisitions and finally delivered on the M&A front,” Lewis said. Joan also said that the drugmaker had determined that more value could be extracted from the Hospira products. But, this will need to be done “outside of Pfizer”. Pfizer Inc. ‘s stake would allow it to profit from the smaller firm’s future growth. The deal is expected to close in the first quarter of 2017, the firms said.

Pfizer’s purchase of Hospira had been seen by Wall Street analysts as a way of bolstering Pfizer’s generic drugs. The San Clemente, California-based firm said last week after several years of analysis that it had decided not to split. Instead, it will hold on to its low-growth generics business. Hospira’s products combined with such products already owned by Pfizer generate annual sales of about $6 bn. Skadden, Arps, Slate, Meagher & Flom LLP and Ropes & Gray LLP are Pfizer’s legal advisers.

Pfizer is Not Done Settling Down Yet

So with plenty of M&A deals and base-shifting attempts, Pfizer hasn’t settled down. The pharmaceutical giant has been in and out of the headlines about breaking up and shopping for suitors. At other times, it is in the news for getting together with other drug firms. The Treasury Department put the kibosh on the Pfizer/Allergan marriage. But, at the time of the Q2 2016 earnings release, you wouldn’t know it from Pfizer Inc. ‘s share price. The stock was up 12% to about $35 at that time. In other words, this was 15 times the 2016 estimated earnings per share. Compared to the market’s 20 times, that’s a compelling valuation, said Joe Williams. Joe is co-manager of the $260 mn Commerce Value fund.

The story there is also good. A breakup in the near future doesn’t seem likely. In the earnings call, Read had said, “the trapped value question has become more complicated”. That optionality doesn’t necessarily have “an expiration date.”

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