Note 2. Acquisitions and Divestitures

A. Acquisitions

Alacer Corp.

On February 26, 2012, we completed our acquisition of Alacer Corp., a privately owned company that manufactures, markets and distributes Emergen-C, a line of effervescent, powdered drink mix vitamin supplements that is the largest-selling branded vitamin C line in the U.S. In connection with this consumer healthcare acquisition, we recorded $247 million in Identifiable intangible assets, consisting primarily of the Emergen-C indefinite-lived brand, $94 million in net deferred tax liabilities and $151 million in Goodwill. The allocation of the consideration transferred has been finalized.

Ferrosan Holding A/S

On December 1, 2011, we completed our acquisition of the consumer healthcare business of Ferrosan Holding A/S (Ferrosan), a Danish company engaged in the sale of science-based consumer healthcare products, including dietary supplements and lifestyle products, primarily in the Nordic region and the emerging markets of Russia and Central and Eastern Europe. Due to the fact that financial information included in our fiscal year 2011 consolidated financial statements for our subsidiaries operating outside the U.S. is as of and for the year ended November 30, this acquisition is reflected in our condensed consolidated financials beginning in the first fiscal quarter of 2012. Our acquisition of Ferrosan’s consumer healthcare business increases our presence in dietary supplements with a new set of brands and pipeline products. Also, we believe that the acquisition allows us to expand the marketing of Ferrosan’s brands through Pfizer’s global footprint and provide greater distribution and scale for certain Pfizer brands, such as Centrum and Caltrate, in Ferrosan’s key markets. In connection with this acquisition, we recorded $483 million in Identifiable intangible assets, consisting of indefinite-lived and finite-lived brands, $124 million in net deferred tax liabilities and $231 million in Goodwill. The allocation of the consideration transferred has not been finalized.

King Pharmaceuticals, Inc.

On January 31, 2011 (the acquisition date), we completed a tender offer for the outstanding shares of common stock of King at a purchase price of $14.25 per share in cash and acquired approximately 92.5% of the outstanding shares. On February 28, 2011, we acquired all of the remaining shares of King for $14.25 per share in cash. As a result, the total fair value of consideration transferred for King was approximately $3.6 billion in cash ($3.2 billion, net of cash acquired).

King’s principal businesses consist of a prescription pharmaceutical business focused on delivering new formulations of pain treatments designed to discourage common methods of misuse and abuse; the Meridian auto-injector business for emergency drug delivery, which develops and manufactures the EpiPen; an established products portfolio; and an animal health business that offers a variety of feed-additive products for a wide range of species.

The following table provides the assets acquired and liabilities assumed from King:

(millions of dollars)	Amounts Recognized as of Acquisition Date (Final)
Working capital, excluding inventories	$	155
Inventories		340
Property, plant and equipment		412
Identifiable intangible assets, excluding in-process research and development		1,806
In-process research and development		303
Net tax accounts		(328	)
All other long-term assets and liabilities, net		102
Total identifiable net assets		2,790
Goodwill(a)		765
Net assets acquired/total consideration transferred	$	3,555

(a)

Goodwill recorded as of the acquisition date totaled $720 million for our three biopharmaceutical operating segments and $45 million for our Animal Health and Consumer Healthcare operating segment. (Since the acquisition of King, we have revised our operating segments. See Note 13A. Segment, Geographic and Other Revenue Information: Segment Information.)

As of the acquisition date, the fair value of accounts receivable approximated the book value acquired. The gross contractual amount receivable was $200 million, virtually all of which was expected to be collected.

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Specifically, the goodwill recorded as part of the acquisition of King includes the following:

●	the expected synergies and other benefits that we believed would result from combining the operations of King with the operations of Pfizer;

●	any intangible assets that did not qualify for separate recognition, as well as future, yet unidentified projects and products; and

●	the value of the going-concern element of King’s existing businesses (the higher rate of return on the assembled collection of net assets versus if Pfizer had acquired all of the net assets separately).

Goodwill is not amortized and is not deductible for tax purposes (see Note 9A. Goodwill and Other Intangible Assets: Goodwill for additional information).

The assets and liabilities arising from contingencies recognized as of the acquisition date are not significant to Pfizer’s condensed consolidated financial statements.

The following table provides the actual financial results of King included in the condensed consolidated statement of income:

(millions of dollars)	King’s Operations Included in Pfizer’s Six-Month 2011 Results
Revenues(a)	$	581
Loss from continuing operations attributable to Pfizer Inc. common shareholders(a), (b)		(74	)

(a)	From January 31, 2011 (the acquisition date) through Pfizer’s second-quarter 2011 domestic and international quarter-ends.

(b)

Includes purchase accounting adjustments related to the fair value adjustments for acquisition-date inventory estimated to have been sold ($119 million pre-tax), amortization of identifiable intangible assets acquired from King ($71 million pre-tax) and restructuring and integration costs ($159 million pre-tax).

If the acquisition of King had occurred on January 1, 2011, the change to Pfizer's Revenues, Income from continuing operations attributable to Pfizer Inc. common shareholders and Diluted earnings per share attributable to Pfizer Inc. common shareholders would not have been material.

B. Divestitures

On April 23, 2012, we announced that we entered into an agreement to sell our Nutrition business to Nestlé for $11.85 billion in cash. The transaction is expected to close by the first half of 2013, assuming the receipt of the required regulatory clearances and satisfaction of other closing conditions. Beginning in the second quarter of 2012, we report the operating results of the Nutrition business as Discontinued operations––net of tax in the condensed consolidated statements of income for all periods presented. The transaction also includes the sale of certain prenatal multivitamins currently commercialized by the Pfizer Consumer Healthcare business unit. The operating results of this product line are also included in Discontinued operations––net of tax for all periods presented. In addition, the assets and liabilities associated with this business are classified as Assets of discontinued operations and other assets held for sale and Liabilities of discontinued operations, as appropriate, in the condensed consolidated balance sheets.

On August 1, 2011, we completed the sale of our Capsugel business for approximately $2.4 billion in cash. The operating results of this business are reported as Discontinued operations––net of tax in the condensed consolidated statements of income for the three and six months ended July 3, 2011.

The following table provides the components of Discontinued operations—net of tax:

	Three Months Ended						Six Months Ended
(millions of dollars)	July 1, 2012			July 3, 2011			July 1, 2012			July 3, 2011
Revenues(a)	$	581		$	714		$	1,101		$	1,369
Income from discontinued operations before provision for taxes on income	$	119		$	128		$	237		$	263
Provision for taxes on income(b)		(53	)		(31	)		(92	)		(68	)
Discontinued operations––net of tax(a)	$	66		$	97		$	145		$	195

(a)	Includes the Nutrition business for all periods presented and the Capsugel business for 2011 only.

(b)

Includes deferred tax expense (includes deferred taxes related to investments in certain foreign subsidiaries resulting from our intention not to hold these subsidiaries permanent in duration) of $22 million and a deferred tax benefit of $4 million for the three months ended July 1, 2012 and July 3, 2011, respectively, and a deferred tax expense of $14 million and a deferred tax benefit of $7 million for the six months ended July 1, 2012 and July 3, 2011, respectively.

The following table provides the components of Assets of discontinued operations and other assets held for sale and Liabilities of discontinued operations:

(millions of dollars)	July 1, 2012		Dec. 31, 2011
Accounts receivable, less allowance for doubtful accounts	$	559	$	550
Inventories		366		359
Prepaid assets		40		45
Current deferred tax assets and other current assets		44		15
Property, plant and equipment, less accumulated depreciation		1,138		1,118
Goodwill		495		498
Identifiable intangible assets, less accumulated amortization		2,620		2,648
Deposits advances and other assets		32		47
Deferred charges		21		23
Noncurrent deferred tax assets and other noncurrent assets		46		14
Assets of discontinued operations and other assets held for sale	$	5,361	$	5,317

Current liabilities	$	427	$	385
Other liabilities		871		839
Liabilities of discontinued operations	$	1,298	$	1,224

The net cash flows of our discontinued operations for each of the categories of operating, investing and financing activities are not significant for any period presented.