Giant pharmaceutical company, Pfizer (NYSE: PFE) has announced on Monday that the company will not split into two: a business focused on patent-protected drugs and the other, a cash-rich older products. The New York City based drug company spent roughly $600 million in preparation for the potential split, said a spokeswoman.
Pfizer Chief Executive Officer, Ian Read said the best structure for the company was to remain as a whole, through the company would “preserve our option to split our businesses should factors materially change at some point in the future.”
Pfizer said in a news release announcing the decision that a supposed “valuation gap” between the company’s market cap and the value of its individual units has closed over time.
“We believe that by operating two separate and autonomous units within Pfizer we are already accessing many of the potential benefits of a split—sharper focus, increased accountability, and a greater sense of urgency— while also retaining the operational strength, efficiency and financial flexibility of operating as a single company,” Mr. Read said.
“… splitting into two companies at this time would not enhance the cash flow generation and competitive positioning of the businesses and the operational disruption, increased costs of a split and inability to realize any incremental tax efficiencies would likely be value destructive,” Mr. Read added.