NEW YORK--Animal-medicine maker Zoetis Inc. (ZTS) priced its
initial public offering above expectations, a strong showing for
the largest deal from a U.S. company since Facebook Inc. (FB)
debuted last May.
Zoetis, which is being carved into a standalone company by drug
maker Pfizer Inc. (PFE), priced 86.1 million Class A shares at $26
apiece, according to an underwriter familiar with the deal's
terms.
The $26 price was more than the $22-to-$25 range initially
outlined in documents filed with the Securities and Exchange
Commission. The IPO is valued at around $2.2 billion. Zoetis will
command a market value of around $13 billion based on the offer
price.
Zoetis, of Madison, N.J., is the largest animal-medicine company
in the world by revenue. It makes vaccines and drugs for livestock
such as cattle and swine, as well as for pets. The company sells
its products directly to livestock producers and veterinarians in
70 countries. Revenue from livestock represents the bulk of its
sales, although the filing notes pet ownership and spending per pet
are increasing around the globe. Emerging markets such as Brazil,
China and India represented 27% of Zoetis's revenue in 2011.
The company competes primarily with the animal-health segments
of other major drug companies including Merck & Co. (MRK),
Sanofi SA (SNY) and Eli Lilly & Co. (LLY).
"Zoetis's IPO will be the first opportunity for a "pure play" in
one of the major animal-health manufacturers," said Morningstar
Inc. analyst David Krempa. The animal-health industry "has
historically been buried within big pharma firms and largely
ignored," he said.
Pfizer, the world's largest drug maker by sales, has been
shedding businesses outside its core medicine franchise to focus on
developing prescription medicines to replace aging products like
cholesterol drug Lipitor, which now faces generic competion. Last
year, Pfizer sold its infant-nutrition business to Nestle SA
(NESN.VX).
Zoetis reported revenue of $3.2 billion for the first nine
months of last year, or about 7% of Pfizer's $43.9 billion in
overall revenue during that period. Zoetis's revenue increased 1.7%
over that time, while net income rose 87% to $446 million.
The company will operate with a dual-class share structure.
Current Pfizer shareholders must go into the open market to buy
some of the 81.6 million Zoetis Class A shares that will be sold in
the IPO. Pfizer will hold all 414 million Class B shares, giving it
roughly 83% control of Zoetis.
Other large carve-outs from well-known companies have been
successful for participating investors in recent years.
Bristol-Myers Squibb Co. (BMY) sold its baby-formula maker Mead
Johnson Nutrition Co. (MJN) in 2009. Mead Johnson's shares have
more than tripled since.
The deal is the largest IPO from a U.S. company since Facebook's
$16 billion deal on May 18, 2012. It is also the largest carve-out
to list on a U.S. exchange since U.K. hedge-fund manager Man Group
PLC (EMG.LN) broke away from MF Global Ltd., which was its
brokerage arm, in a $2.9 billion deal in 2007, according to
Dealogic.
J.P. Morgan Chase & Co. (JPM), Bank of America Corp. (BAC)
and Morgan Stanley (MS) are serving as Zoetis's lead
underwriters.
By Write to Chris Dieterich at
christopher.dieterich@dowjones.com
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