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Pfizer (PFE) to Split Off Remaining Interest in Zoetis (ZTS)

May 22, 2013 8:04 AM EDT Send to a Friend
Pfizer Inc. (NYSE: PFE) announced its intention to split off its remaining interest in Zoetis Inc. (NYSE: ZTS), through an exchange offer. Zoetis, formerly Pfizer’s animal health business, completed its initial public offering (IPO) in February 2013. In the exchange offer, Pfizer shareholders can exchange all, some or none of their shares of Pfizer common stock for shares of Zoetis common stock owned by Pfizer. The exchange offer is anticipated to be tax-free for participating Pfizer shareholders in the United States, except with respect to cash received in lieu of a fractional share. The completion of the full separation of Zoetis is expected to be accretive to Pfizer’s earnings per share beginning in 2014.

Pfizer also announced today that, in connection with the planned split-off, it has received a waiver of the 180-day lock-up from the joint book running managers of the Zoetis IPO.

The exchange offer is designed to permit Pfizer shareholders to exchange their shares of Pfizer common stock for shares of Zoetis common stock at a 7% discount, subject to an upper limit of 0.9898 shares of Zoetis common stock per share of Pfizer common stock. If the upper limit is not in effect, for each $100.00 of shares of Pfizer common stock accepted in the exchange offer, tendering shareholders would receive approximately $107.52 of Zoetis common stock. These values will be determined by the simple arithmetic average of the daily volume-weighted average price of Pfizer common stock and Zoetis common stock on the NYSE during the three consecutive trading days ending on and including the expiration date of the exchange offer, which are expected to be June 17, June 18 and June 19, 2013. The final exchange ratio, reflecting the number of shares of Zoetis common stock that tendering shareholders will receive for each share of Pfizer common stock accepted in the exchange offer, will be announced by press release by 4:30 p.m., New York City time, on June 19, 2013, unless the exchange offer is extended or terminated. The final exchange ratio, when announced, and a daily indicative exchange ratio beginning at the end of the third day of the exchange offer period, will also be available at www.zoetisexchange.com.

The completion of the exchange offer is subject to certain conditions, including: the distribution of at least 160,394,000 shares of Zoetis common stock in exchange for shares of Pfizer common stock tendered in the exchange offer; the receipt of an opinion of counsel that the exchange offer will qualify for tax-free treatment to Pfizer and its participating shareholders; and the continued effectiveness and validity of a private letter ruling received from the U.S. Internal Revenue Service, regarding the exchange offer, among other things.

Pfizer owns 400,985,000 shares of Zoetis Class B common stock, which represents approximately 80.2% of the outstanding common stock of Zoetis. Prior to completion of the exchange offer, Pfizer intends to convert its Zoetis Class B common stock into Zoetis Class A common stock in an amount sufficient such that Zoetis Class A common stock may be distributed in the exchange offer. Upon the completion of a fully subscribed exchange offer, only Zoetis Class A common stock (which will be reclassified as Zoetis common stock) will remain outstanding. The largest possible number of shares of Pfizer common stock that will be accepted in the exchange offer equals 400,985,000 divided by the final exchange ratio. Because the exchange offer is subject to proration if the exchange offer is oversubscribed, the number of shares of Pfizer common stock that Pfizer accepts in the exchange offer may be less than the number of shares tendered. If the exchange offer is undersubscribed, Pfizer would distribute less than 400,985,000 shares of Zoetis common stock. In that case, Pfizer would continue to own an interest in Zoetis and, depending on the number of shares of Zoetis common stock distributed in the exchange offer, Pfizer could retain voting control of Zoetis with respect to the election of directors. In addition, Pfizer could use additional exchange offers or a special dividend to all Pfizer shareholders to complete the disposition of its Zoetis shares.

The exchange offer is voluntary for Pfizer shareholders. No action is necessary for Pfizer shareholders who choose not to participate, and their existing Pfizer shares will not be impacted.

The terms and conditions of the exchange offer will be more fully described in a registration statement on Form S-4 to be filed by Zoetis with the Securities and Exchange Commission (SEC) and a tender offer statement on Schedule TO to be filed by Pfizer with the SEC today.

J.P. Morgan Securities LLC, BofA Merrill Lynch, Goldman Sachs & Co. and Morgan Stanley will serve as the dealer managers for the exchange offer.




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