Pfizer Inc. (NYSE:PFE), the world's largest drug maker, announced that its animal medicine unit Zoetis Inc. aims to raise approximately $2.2 billion in an IPO, the biggest since Facebook Inc (NASDAQ:FB) initial public offering in May last year. Zoetis manufactures drugs and vaccines for pets, cattle, swine and other animals. Sanofi SA (NYSE:SNY) (EPA:SAN) and Merck & Co., Inc. (NYSE:MRK) are the key competitors of Zoetis, which will trade under the ticker symbol ZTS.
About 86.1 million Zoetis shares are expected to go on sale Friday for $22 to $25 each, valuing the business at $11.8 billion calculated at the midpoint of the price range, according to regulatory filings. The animal business will have a dual-class share structure. All the A-class shares, roughly 86.1 million, will be sold to the public, while the 414 million Class B shares will be owned by Pfizer. That gives Pfizer about 83 percent control of the company.
Last year, Pfizer Inc. (NYSE:PFE) sold its infant-nutrition arm to Nestle SA for $11.9 billion in an attempt to divest the non-core businesses and focus on its core human health business. The Zoetis IPO is next in line. Pfizer Inc. (NYSE:PFE) will use proceeds to raise cash and give it back to shareholders through a stock buyback.
Zoetis posted sales of $4.3 billion in 2012, or about 7 percent of Pfizer's total sales. The Madison, New Jersey-based company's IPO will be led by Bank of America Corp (NYSE:BAC), Morgan Stanley (NYSE:MS) and JPMorgan Chase & Co. (NYSE:JPM). Analysts believe that Zoetis is priced very reasonably if it maintains its historic rate of sales growth. Virbac SA, a French animal drug maker with $881 million in revenues, is trading 22 times its net income. Another comparable, British pure-play animal health company Dechra Pharmaceuticals plc (LON:DPH) trades 46 times its net income in London.
Leekink Swann said in a research report that the spinoff wouldn't affect Pfizer Inc. (NYSE:PFE) EPS in the long-run, and the drug maker remains a compelling safe haven for investors. However, analysts estimate Pfizer to perform in line with market. The main value drivers are expected to be restructuring driven share repurchases from its sale or spin programs. Analysts said Pfizer may also surprise by increasing dividends in 2013.
Share of Pfizer Inc. (NYSE:PFE) were trading at $27.52 this morning, and have risen 27.9 percent this year.