Mylan N.V. (NASDAQ:MYL) and Pfizer’s (NYSE:PFE) Upjohn unit will merge in an all-stock reverse Morris Trust transaction.
A reverse Morris Trust is a tax-free deal involving a spinout of a subsidiary that is merged with another company. Upjohn will issue $12B of debt at or prior to separation. Proceeds will go to Pfizer.
PFE shareholders will own 57% of the combined company while MYL shareholders will own 43%. On a pro forma basis, 2020 revenues should be $19B – 20B with non-GAAP EBITDA of $7.5B – 8.0B and cash flow of more than $4B. Phased synergies should be ~$1B by 2023. Debt/non-GAAP EBITDA should be 2.5x by the end of 2021. At closing, it will have ~$24.5B of debt outstanding.
Upjohn’s product portfolio includes Lipitor (atorvastatin calcium), Celebrex (celecoxib) and Viagra (sildenafil).
The new organization, to be renamed and rebranded when the transaction closes, will be led by Mylan Chairman Robert Coury as Executive Chairman. Upjohn chief Michael Goettler will be CEO and Mylan President Rajiv Malik will be serve as President. Current Mylan CEO Heather Bresch will retire.
Post-spinout, Pfizer expects to generate ~$40B in revenues in 2020 with a mid-30% pre-tax earnings yield and cash flow ops of $11B – 12B.
Pfizer shareholders will receive a stock dividend of 0.12 shares per common share owned provided that the equity distribution is structured as a spinout.
The companies will host a conference call this morning at 8:30 am ET to discuss the tie-up.
MYL is up 16% premarket on robust volume. PFE is down 2% on modest volume.
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