Biggest IPO Since Facebook Tests Pfizer’s Pets Strategy

 

By Lee Spears and Drew Armstrong - Bloomberg Businessweek

January 31, 2013

 

Pfizer (PFE) Inc. is taking its animal- health unit public in the biggest U.S. initial offering since Facebook Inc., a bet that growing affluence means more spending on caring for livestock and pets.

 

Pfizer’s Zoetis Inc. is seeking to sell 86.1 million shares today for $22 to $25 each, giving the unit a market value of about $11.8 billion at the midpoint of the range, regulatory filings show. The IPO, which may raise as much as $2.2 billion, would make Zoetis the largest public company of its kind -- and one of the only focused solely on medicines for animals, competing with businesses owned by such drugmakers as Sanofi and Merck & Co.

 

The IPO is well-timed -- coming as stocks hit 5-year highs -- and represents another step by Pfizer Chief Executive Officer Ian Read to slim down and focus on developing new prescription drugs. Both Novartis AG and Bayer AG explored a purchase of Zoetis last year, according to people familiar, reflecting the attractiveness of the animal-health industry.

 

“Globally, people are feeling wealthier, which tends to mean more demand for meat for human consumption,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business. “They’re also more likely to have pets and more likely to take better care of their pets.”

 

 

New Jersey

 

Pfizer, the world’s largest drug company with $61.2 billion in sales, is offering 17 percent of Zoetis in the IPO, the biggest in the U.S. since Facebook raised $16 billion last year. Shares will start trading tomorrow on the New York Stock Exchange under the symbol ZTS. The IPO is being led by JPMorgan Chase & Co., Bank of America Corp. and Morgan Stanley.

 

Zoetis, based in Madison, New Jersey, traces its roots back to 1952 as a Pfizer unit and has made at least 10 acquisitions to become the largest animal-health business, with $4.3 billion sales in 2012 -- about 20 percent of the $22 billion market.

 

It competes mainly with non-listed units of companies such as Merck, Sanofi and Eli Lilly & Co., according to Mark Schoenebaum, a New York-based analyst at ISI Group Inc.

 

While Zoetis’s 17 percent sales growth in 2011 outpaced all but Lilly’s animal unit, data compiled by Bloomberg show, Pfizer is parting with the company as part of Read’s strategy to concentrate on the drug business after losing patent protection for cholesterol pill Lipitor, the world’s best-selling medicine.

 

Pfizer sold its infant-nutrition business for $11.9 billion to Nestle SA last year. The drugmaker will likely use proceeds from divestitures for share buybacks, Read has said.

 

 

Mead Johnson ...

 

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