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Daniel Klausner

Daniel Klausner
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  • 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[View news story]
    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.
    May 22 01:40 PM | 1 Like Like |Link to Comment
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