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Pfizer (PFE) plans to spin off its remaining stake in Zoetis (ZTS) through a tax-free exchange...

Pfizer (PFE) plans to spin off its remaining stake in Zoetis (ZTS) through a tax-free exchange offer in which Pfizer owners can exchange their Pfizer shares for stock in Zoetis owned by Pfizer (got that?). Pfizer has received a waiver of the 180-day lock-up from the book runners of the Zoetis IPO. PFE +2.1%, ZTS -1.2% premarket. (PR)
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Comments (11)
  • Micro_Cap_Maven
    , contributor
    Comments (106) | Send Message
     
    Wow, that's an odd plan. Normally, the parent company would either spin back pro rata shares of the sub (ZTS) to the PFE shareholders, or do a secondary offering of the shares still held by PFE, bringing cash back into the parent.

     

    In this case the current PFE shareholder actually has to choose to let go of his PFE shares in exchange for ZTS shares, which fairly radically changes the character of his share ownership from big pharma to animal health, and also steps down to a smaller market cap company. It's kind of a wacky plan -- I wonder what investment banker thought this one up.
    22 May 2013, 08:51 AM Reply Like
  • Fueled By Randomness
    , contributor
    Comments (292) | Send Message
     
    Unfortunately, it is becoming a fairly common practice. Quite a few big name companies have done this in the past few years. Kraft's 2008 "split-off" (instead of spin-off) of Ralcorp is one, Bristol Meyers split-off of Mead Johnson was another that comes to mind. Obviously, it's a problem for shareholders because you have to decide between holding shares of a known quantity or exchanging them for some number of shares in a unknown one. Interestingly enough, the folks who took the split-off company shares make out better than the ones who kept the old company ones, at least in the examples that I can remember. Many times, not always but often, a traditional spin-off ends up being a POS company, overburdened with debt, that fails because the assets being spun off were not really wanted by the parent anyway. I don't know if that's happened with a split-off yet but to recall the old maxim, if things can go wrong, they will.
    22 May 2013, 02:37 PM Reply Like
  • Bob Carl
    , contributor
    Comments (246) | Send Message
     
    It is a little too fancy for me. I would have preferred a simple pro-rata distribution to PFE shareholders.
    22 May 2013, 09:40 AM Reply Like
  • Kekkonen
    , contributor
    Comments (148) | Send Message
     
    Me too. Heck, I'm almost glad that in my tax jurisdiction the transaction would be taxable -- now I don't have to dig up my calculator as I'm left with only one sensible option.
    22 May 2013, 10:21 AM Reply Like
  • taplinger
    , contributor
    Comments (270) | Send Message
     
    I can tell you one reason Pfizer did this - boost stock price. Ian Reed likes to make Wall St. happy - had his last quarterly report not disappointed, you probably wouldn't be seeing this, or at least not now.

     

    Other CEOs are content to make excuses about earnings and let stock price drift lower. Their BODs and stockholders put up with it. Reed and his senior management are original thinkers - instead of letting Lipitor expire without a plan, they aggressively market it against generics; instead of losing Viagra sales to online retailers, they are marketing Viagra directly.

     

    When Pfizer's BODs fired their last CEO, they did what very few BODs do - put the shareholders above the current CEO and themselves. Hold your breath while you wait for GE to do that.
    22 May 2013, 10:28 AM Reply Like
  • Araphael
    , contributor
    Comments (2) | Send Message
     
    So this means that if I do keep pfe I lose part of the total value of the ordinal pfe I owned...that make no sense..I will have less value
    22 May 2013, 10:50 AM Reply Like
  • chopchop0
    , contributor
    Comments (3933) | Send Message
     
    it's an exchange I believe. If you do nothing, you keep existing PFE shares. You can choose to exchange some, all or none of your shares.

     

    http://bit.ly/10PIhfG
    22 May 2013, 11:06 AM Reply Like
  • kenpat
    , contributor
    Comments (8) | Send Message
     
    I have made my decision to stick with PFE for the reasons mentioned above. One more thing PFE should gain or atleast stay where it is as in essence they are doing a buy back but @ 31 per share that is an expensive buy back. The investment banker must have got a very high fee to propose this wacky plan....
    22 May 2013, 01:39 PM Reply Like
  • Daniel Klausner
    , contributor
    Comment (1) | Send Message
     
    This transaction is a split off which is basically an exchange of Pfizer shares for Zoetis shares.

     

    Besides having the tax free benefits similar to a spin off - in this case Pfizer preserved their optionality on the carve out IPO by retaining more than 80% of the voting control - it is a great way to create a "buy back" for Pfizer shares and thus reduce Pfizer shares outstanding.

     

    Since the Zoetis stock has done so well, the company probably chose to use this split off vs a simple spin off. Split offs are usually done when the initial IPO stock has done well. The stock came out at $26 and has traded as high as $35 area.

     

    So Pfizer gets two benefits from this transaction, tax free proceeds AND a reduction in Pfizer shares outstanding.
    22 May 2013, 01:40 PM Reply Like
  • tjwirth
    , contributor
    Comment (1) | Send Message
     
    Pfizer Zoetis stock. The exchange offer publication will make you screwy if you finish it or understand it. I did understand the 27 pages of risk factors of Zortis.Right or wrong, I based my decision on that. Too many unknowns. I'll keep what I hold, PFE.
    14 Jun 2013, 03:55 PM Reply Like
  • taplinger
    , contributor
    Comments (270) | Send Message
     
    The most important part of the tender is you're getting a 7% discount on the ZTS. All other things being equal, if the price of the two stay the same, you could exchange the ZTS for PFE the next day and have 7% more PFE than you did the day before. Not a bad way to make $7,000 overnight if you own $100,000 of PFE. However, all things are not equal and the price of the two could change after the tender, for better or for worse. Also, PFE has some if ands and buts as part of the tender offer that can change things.
    15 Jun 2013, 07:55 PM Reply Like
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