Pfizer Inc. (PFE) announced recently that it intends to spin off its remaining stake in Zoetis Inc. (ZTS). Zoetis is Pfizer’s former Animal Health business. To attain this objective, Zoetis intends to file a registration statement with the US Securities and Exchange Commission pertaining to the exchange offer announced by Pfizer. The offer will allow the stockholders of Pfizer to exchange all, some or none of the company’s shares with shares of Zoetis.
We note that Pfizer currently has an 80% interest in Zoetis, which started trading on the New York Stock Exchange from Feb 1, 2013. Pfizer sold 20% shares of Zoetis in an initial public offering. Pfizer now intends to give up its remaining interest in Zoetis, which is only possible after the successful subscription of the exchange offer.
In the event of the offer being undersubscribed, Pfizer would distribute less than 400,985,000 shares of Zoetis. Pfizer would then continue to own an interest in its former Animal Health business. Moreover, Pfizer could retain voting control of Zoetis pertaining to the election of directors, depending on the number of Zoetis shares distributed in the offer. Furthermore, Pfizer has the option to provide more exchange offers or a special dividend to all its stockholders for completing the disposition of its Zoetis shares.
We are positive on Pfizer’s decision to spin off its Animal Health business as it will enable the pharma major to focus on its core business. Zoetis, which focuses on discovery, development, manufacture and marketing of animal vaccines and medicines, has a presence in multiple countries across the globe.
Zoetis boasts of a robust and diversified product portfolio consisting of more than 300 product lines. The product portfolio is divided into five divisions – vaccines, parasiticides, anti-infectives, medicated feed additives and other pharmaceuticals for veterinarians and livestock producers.
Pfizer carries a Zacks Rank #3 (Hold).We have a similar stance on Zoetis. Stocks such as Celgene Corporation (CELG) and Cubist Pharmaceuticals, Inc. (CBST) appear to be more attractive with a Zacks Rank #2 (Buy) each.
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