
Pfizer (PFE) Stock Sinks, Negotiating Break-Up Fee in Allergan Deal, Jim Cramer's View
NEW YORK (TheStreet) -- Pfizer (PFE) - Get Report shares are slumping 2.54% to $32.47 on Thursday as the biopharmaceutical company is reportedly negotiating a break-up fee of between 2% to 3% in a $150 billion deal with Botox-maker Allergan (AGN), according to Reuters.
Earlier today, the two companies were speeding up their takeover talks.
One hurdle that they face is a letter on tax inversion deals from the U.S. Treasury Department, which was released on Wednesday.
While the agreement could be announced as soon as Monday, investors are concerned that the deal could be delayed due to this regulatory challenge.
TheStreet's Jim Cramer, Portfolio Manager of the Action Alerts PLUS Charitable Trust Portfolio commented in an article titled 'Allergan-Pfizer Talks Still Moving Apace' saying: "The latest update in the merger saga provides a bit more clarity on the potential value of the deal and demonstrates the companies' commitment to the transaction, despite the market's concerns over Mr. Lew's statements. While we cannot predict what regulations could come out of the Treasury Secretary's coming announcement, it seems as if AGN and PFE will not be deterred from following through with their mega-deal."
"That said, should any new legislation pose a threat to the merger, we remain confident in AGN as its own company and would welcome the opportunity for management to pursue their own deal - one that maybe wouldn't be criticized for its tax implications."
Looking at the costly break-up fee, it seems as though the companies are confident that the regulatory risk will not threaten the deal, Reuters noted.
Shares of Allergan are declining 2.08% to $304.35 on Thursday afternoon.
Separately, TheStreet Ratings team rates ALLERGAN PLC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate ALLERGAN PLC (AGN) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and expanding profit margins. However, as a counter to these strengths, we find that the growth in the company's earnings per share has not been good.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- AGN's very impressive revenue growth greatly exceeded the industry average of 3.7%. Since the same quarter one year prior, revenues leaped by 90.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- ALLERGAN PLC has improved earnings per share by 46.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ALLERGAN PLC reported poor results of -$8.65 versus -$5.43 in the prior year. This year, the market expects an improvement in earnings ($15.33 versus -$8.65).
- The current debt-to-equity ratio, 0.55, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that AGN's debt-to-equity ratio is low, the quick ratio, which is currently 0.52, displays a potential problem in covering short-term cash needs.
- Compared to other companies in the Pharmaceuticals industry and the overall market, ALLERGAN PLC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: AGN








