Pfizer’s Animal Health Stock Exchange Offer Has Too Many Takers

Investors in Pfizer Inc. (PFE), the world’s biggest drugmaker, oversubscribed to a program to exchange some or all of their shares for those of its former animal-health unit, Zoetis Inc. (ZTS)

Pfizer will retire about 405 million shares, or about $11.4 billion worth, at today’s price, as investors tried to exchange more Pfizer shares than there was Zoetis stock. Shareholders will get 24 percent of the 1.68 billion shares tendered.

The share exchange completes the New York-based company’s restructuring plan, in which it dropped two non-drug units, the animal health business and an infant nutrition line. Zoetis began trading as a separate company on February 1, surging 19 percent in its debut after raising $2.24 billion in an initial public offering. As a result of the spinoff completion, the company expects adjusted earnings of $2.10 to $2.20 a share, from a previous projected range of $2.14 to $2.24, according to its statement today.

Pfizer offered investors the Zoetis stock at a 5.4 percent discount. For every $100 of Pfizer stock traded in, they’ll get $105 of Zoetis shares in return, which Pfizer gave as an incentive to participate in the exchange.

Zoetis is based in Florham Park, New Jersey, and makes and sells drugs and treatments for animals. Livestock products make up 65 percent of its sales, while medicines for pets account for the rest. Much of the company’s growth depends on rising wealth levels around the world, as people eat more meat and care for companion animals.

Board Appointment

The company today also said it appointed Michael McCallister, a former chief executive officer at the Louisville, Kentucky-based health insurer Humana Inc. as Zoetis’s non-executive chairman. He replaces Chief Financial Officer Frank D’Amelio, who will remain on the Zoetis board.

Zoetis shares fell 1.8 percent to $30.05 at 10:25 a.m. in New York. Pfizer declined by less than 1 percent to $28.20

Chief Executive Officer Ian Read is now deciding whether to split the company in two to separate its generic drug’s business. The split could happen in the next three years.

JPMorgan Chase & Co., Bank of America Corp., Goldman Sachs Group Inc. and Morgan Stanley managed the deal. Skadden, Arps, Slate, Meagher & Flom LLP acted as legal adviser.

To contact the reporter on this story: Drew Armstrong in New York at darmstrong17@bloomberg.net; Samuel Adams in New York at sadams69@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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