Pfizer spinoff’s shares surge on debut

New York TimesFebruary 1, 2013 

It is the biggest initial public offering since Facebook’s, but so far the debut of Zoetis is following a much different script than the giant social network did last year.

Shares in the company, an animal health business spun off from Pfizer, opened Friday at $31.50, valuing the company at nearly $16 billion. They closed the day at $31.01, up nearly 20 percent from the offering price.

Even as the overall stock market was up – with the Dow Jones industrial average having cracked 14,000 for the first time since 2007 – Zoetis has enjoyed a favorable debut in life as a publicly traded company. Demand for shares during a nine-day road show was exceptionally strong, allowing underwriters for the company to price the offering at $26 a share, a dollar above the high end of expectations.

Overall, the company raised more than $2.2 billion from the offering.

Pfizer’s animal-health unit employed roughly 250 people in North Carolina in August, with the bulk of those employees operating out of its global poultry headquarters in Durham. Some of those employees joined Pfizer in 2007 when it bought Embrex, a Durham company that sold vaccines and equipment to vaccinate chickens and turkeys.

The success of Zoetis may prompt other big pharmaceutical companies, like Merck or Sanofi-Aventis, to spin off or sell their own animal health divisions.

Zoetis’ Chief Executive Officer Juan Ramon Alaix said in a telephone interview Friday that investors believe in the company’s growth story. Its business of providing medicines and treatments both to livestock and pets will continue expanding as countries develop. Rising wealth means both more consumption of meat and adoption of pets, the company has said.

Alaix argued that investors remain drawn to Zoetis because of its dominant position in the animal health industry, as well as the strength of its manufacturing and sales arms.

“We don’t see our leadership being challenged,” he said. “In my opinion, it’s a very attractive investment opportunity.”

While Pfizer remains Zoetis’ single-biggest shareholder, with roughly an 80 percent stake, the drug giant is expected to divest its holdings within 18 months.

In the meantime, Alaix said, the company will continue to focus on its rapid growth, which is expected to come primarily from organic business expansion rather than through deal-making. And for the time being, he added, Zoetis will remain independent.

“We’ll work every day to show shareholders that we are worth being a public company,” he said.

Staff writer David Bracken contributed.

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