Would You Pay 39% More Than The Asking Price?

Of course you wouldn’t pay 39% more.  But Pfizer recently did.


New York-based Pfizer (PFE) agreed to acquire Hospira (HSP).  Pfizer will pay $90 per share in cash, which represents a 39% premium to HSP’s closing price from the day before.  The companies put the deal’s enterprise value at about $17 billion.

This is a new definition for insane.

I wonder how much the executives of each company got to approve this deal.  I also wonder who will pay for this.  Hmmm

Here is another similar deal.

Richard Baker, chief executive, along with his investment firm, NRDC Equity Partners, relied heavily on borrowed money when it bought out another company recently.

Of the $1.2 billion that it paid for Lord & Taylor, only $25 million came in the form of equity [2%], with the remainder made up of debt financing, secured by the department store estate. [The New York Times]

When was the last time you bought something with only a 2% down payment?

For more information on the leveraged loan bubble, see this