Zoetis Inc. (ZTS)

[DanClark69]

Zoetis Swings to Profit on Higher U.S. Sales

[DewDiligence]

ZTS boosts annualized dividend to $0.288/sh (from $0.26):

#msg-95136882

[DewDiligence]

ZTS presenting at BofA on 12/16/13 12:35PM:

http://finance.yahoo.com/news/zoetis-participate-2013-bank-america-133000262.html

[DewDiligence]

ZTS profile in WSJ: #msg-94280538.

[DewDiligence]

ZTS reports solid 3Q13 results: #msg-93718967.

[DewDiligence]

ZTS reports 3Q13 results on 11/5/13; CC at 8:30am ET.

[DewDiligence]

ZTS insider buy: #msg-90932283.

[DewDiligence]

ZTS +2% on solid, though not spectacular, quarter:

http://finance.yahoo.com/news/zoetis-reports-second-quarter-2013-110000297.html

Foreign exchange shaved 2% from 2Q13 sales, but the tax rate (one of my reasons for buying this name—see #msg-85781758) held at 29%.

[DewDiligence]

ZTS JV receives China approval for porcine vaccine: #msg-90654475.

[DewDiligence]

2Q13 CC is 8/6/13 at 8:30am ET.

[DewDiligence]

Correct—the quarterly dividend is $0.065/sh for a yield of 0.9% at the current share price. However, I expect the dividend payout to be hiked substantially in the next couple of years.

[rayrohn]

lol the dividend is 6 and 1/2 cents not .65

[DewDiligence]

Participants in PFE-ZTS swap will get 0.9898 shares of ZTS for each share of PFE tendered and accepted; offering is 2x oversubscribed, so PFE shareholders who tendered will get only about half of their tendered shares exchanged into ZTS:

#msg-89180739

[DewDiligence]

ZTS is one of my top picks: #msg-89058753. FWIW

[DewDiligence]

ZTS joins S&P 500 (eom).

[DewDiligence]

ZTS/PFE swap update: #msg-88986663.

[DewDiligence]

ZTS presentation wrt voluntary PFE swap (30 pages):

http://www.sec.gov/Archives/edgar/data/1555280/000119312513233678/d543006d425.htm

Also see discussion in #msg-84129296 and #msg-88194519.

[DewDiligence]

Details of optional PFE-ZTS swap have been announced:

#msg-88194519

The 7% discount makes the swap an attractive proposition for PFE shareholders.

[DewDiligence]

PFE still hasn't decided how it will distribute the 80% of ZTS not held by public shareholders—i.e. whether or not to do a swap of ZTS shares for PFE shares.

[DewDiligence]

ZTS +2% on company’s first-ever quarterly report: #msg-87417100.

[DewDiligence]

ZTS off ~1% today, paradoxically (but logically) because PFE is up so much.

[DewDiligence]

Barron’s feature on ZTS misses the mark: #msg-85781758.

[eslorudkey]

I like this company they will grow for sure ;) I only see good things on the horizon...

[Anticipating]

I'm incline to agree,me thinks they will hold on to the ZTS shares!One sided hit piece,imo with no pm,rb....is the new choice!

GO ZTS!

[DewDiligence]

did you mention earlier that Pfizer will be distributing ZTS shares to current PFE shareholders, but only this summer?

The target date for the distribution (probably in the form of a voluntary exchange of ZTS shares for PFE shares) is Jul 2013.

[idkmybffjill]

Very clever...I'm impressed. Plus, they made money from the IPO. Nice work Pfizer!

Real question is will Pfizer executives be holding onto their ZTS shares? I'm inclined to think that they will.

[DewDiligence]

Yes, PFE will retire the exchanged shares, so the the effect will be similar to a share buyback but without any cash expenditure by PFE.

[idkmybffjill]

So for shareholders who agree to the exchange and get ZTS shares and "turn in" their PFE shares, what happens to those PFE shares? Will Pfizer retire them from the Treasury? any ideas? Not sure if I'm thinking about this the wrong way lol

[DewDiligence]

The exact distribution arrangement hasn't been determined yet. If PFE offers a voluntary exchange (the most likely scenario), the exchange ratio will reflect the market prices of PFE and ZTS at the time of the offering, but there will be a discount applied to the share price of ZTS to encourage PFE shareholders to participate.

You can study what BMY did with the MNJ spinoff to see how a voluntary-exchange offering works.

[idkmybffjill]

Nvm, I just saw this:

PFE will IPO a 20% stake in ZTS on 2/1/13 and will distribute the remaining 80% in Jul 2013 to PFE shareholders via a voluntary exchange offer

How will the "exchange" offer work? Obviously a 1:1 ratio would be a terrible deal lol.

[idkmybffjill]

ZTS could conceivably lose market share and perform badly even if the animal-health industry as a whole remains strong, but there’s no logical reason I know of why that should happen.

Short of a drug having unintended consequences and big lawsuits, I also agree and don't see any reason why ZTS should lose market share. I think it'll be a great long-term buy, although I do believe there are better spin-off opportunities in the market right now (and coming into the market in the near future).

Roy, did you mention earlier that Pfizer will be distributing ZTS shares to current PFE shareholders, but only this summer?

[DewDiligence]

IPO epilogue / ZTS’ long-term prospects:

ZTS will turn out to be a solid long-term holding, IMO. If they can grow sales at 5-7% per annum, which seems like a conservative forecast, they have ample leverage from the SG&A and income-tax lines (and share buybacks) to generate 10%+ EPS growth for several years. This projection doesn’t even include growth from bolt-on acquisitions, which will likely add a few more percentage points.

For the animal-health (i.e. animal-drug) industry to do badly, people around the world would have to start eating less meat or owning fewer pets, both of which run counter to trends consequent to The Global Demographic Tailwind (#msg-84067676). ZTS could conceivably lose market share and perform badly even if the animal-health industry as a whole remains strong, but there’s no logical reason I know of why that should happen.

[DewDiligence]

More color on ZTS spinoff from Bloomberg: #msg-84125595.

[DewDiligence]

ZTS—I ended up buying a starter position at $30.85 for the institutional portfolio I manage. Leverage on the SG&A and tax lines, as described in #msg-84068724, give me confidence that ZTS can increase (non-GAAP) EPS by 10%+ for several years to come, so the valuation seems reasonable, albeit not a screaming buy. I did not (yet) buy any shares for my personal account.

[G. Falcone]

This one is gonna be good.

[eastunder]

Zoetis raises about $2.2 billion in IPO

Pfizer's animal health unit Zoetis raises $2.2B in IPO after pricing 86.1M shares at $26 each
By The Associated Press | Associated Press

http://finance.yahoo.com/news/zoetis-raises-2-2-billion-124704383.html


Pfizer's animal health business Zoetis has raised about $2.2 billion in its initial public offering of 86.1 million shares, and the stock is expected to begin trading Friday.

The New York company priced the IPO at $26 per share, which is $1 above the top end of the range it estimated in filings with the Securities and Exchange Commission.

Zoetis said underwriters have an option to purchase up to an additional 12.9 million shares to cover excess demand.

The company, which makes and sells animal health medicines and vaccines, will not receive any of the offering proceeds. Pfizer, the world's largest drugmaker, will retain about an 83 percent ownership stake in Zoetis and will own all of the company's outstanding Class B shares. The offering focused on Class A shares.

If the underwriters exercise their option in full, Pfizer's ownership stake will be reduced to about 80 percent.

Pfizer said Tuesday Zoetis revenue rose 6 percent to $1.17 billion in the fourth quarter.

Shares will trade on the New York Stock Exchange under the symbol "ZTS."

[eastunder]

Zoetis IPO Offers Great Opportunity In Growing Sector

February 1, 2013

http://seekingalpha.com/article/1149361-zoetis-ipo-offers-great-opportunity-in-growing-sector?source=yahoo


Zoetis (ZTS), the animal health unit from Pfizer (PFE), has officially been priced for its initial price offering. On Thursday night, Pfizer sold 86.1 million shares at $26 for a total offering of $2.24 billion. The valuation from the IPO gives Zoetis a market valuation of $13 billion. Shares priced above their initial range of $22-$25.

The new public company has a 60 year history in animal medicine. Zoetis has grown through acquisitions and is the largest of its kind in the world. Zoetis competes with other large pharmaceutical companies that have animal health units including: Merck (MRK), Sanofy (SNY), and Eli Lily (LLY).

Zoetis has over 300 products with sales in 120 countries. The company's two segments are livestock and companion animals. Livestock contributed 66% of the most recent fiscal year, while companion animals made up the remaining 34%.

One of the company's key strengths is its presence in emerging markets. Growth in food consumption is leading to larger animal populations in several new countries. In 2012, emerging markets made up 27% of sales. By region 2012 sales were:

· United States: $1.7 billion

· Europe/Africa/Middle East: $1.1 billion

· Canada/Latin America: $0.8 billion

· Asia/Pacific: $0.6 billion

Zoetis' strengths include:

· Global leader with scale and scope

· Established direct presence in emerging markets

· Diversified product portfolios

· Leader in direct sales and marketing with strong customer relationships

· Leader in product development

· High quality products delivered reliably by our world-class manufacturing operations

· Dedicated employees and experienced management team

· Track record of strong top-line revenue growth and significant cash flow generation

Growth plans for the future include:

· Direct local pressure

· Penetrate emerging markets

· New product development

· Remain partner of choice

· High quality products and high margins

· Complementary businesses including diagnostics, genetics, and dairy data management

In the first nine months of fiscal 2013, Zoetis has recorded sales of $3.2 billion. Net income over that period has been $482 million, which is a 27% increase from the prior year's nine months. In the past two years, sales have grown 18% and 30%, respectively.

Animal medicine is different from large pharmaceutical companies and offers several key benefits including:

· Faster research and development

· Diverse product portfolios

· Self paying customers, less insurance companies to deal with

Zoetis will pay a quarterly dividend of $0.065, representing an initial yield of 1%. I expect this to raise at least within the next year. To me this offering is similar to when Bristol Myers (BMY) spun off Mead Johnson (MJN). The move was done to separate businesses to flourish on their own. Pfizer has done this in similar fashion to separate the animal business and allow it to grow on its own through acquisitions and internal growth. Since that time, shares of Mead Johnson are up 154% in just shy of three years.

The animal health sector is growing and represents good growth for shareholders. According to Vetnosis research, compound annual growth in the sector is expected to be 6% from 2011-2016. Zoetis breaks down reasons for higher demand among its two key segments:

Livestock:

· Human population growth

· Demand for nutrition and protein

· Scarcity of land

· Focus on food safety

Companion Animals:

· Disposable income in emerging markets

· Increased pet ownership

· Animals living longer

Pfizer was one of my top ten stocks for 2013, with the Zoetis spin-off being a big reason. In my three reasons, I listed the Zoetis spin off as a big reason to buy shares. The other two were dividend yield/share buybacks and the drug approval of Eliquis. Since the start of the year, Pfizer shares have risen 8.8%. The positive pricing of Zoetis along with the spin-off to existing shareholders will send shares higher in the next trading week.

Pfizer sold its nutritional business to Nestle for $11.85 billion. The sale was one of a similar fashion as the Zoetis IPO. Pfizer is focusing on its core businesses and also trying to free up cash to use for acquisitions and research and development. Some of the money from the IPO will continue to be used in share repurchase programs.

[DewDiligence]

ZTS begins trading in 30-32 range; I will wait.

[DewDiligence]

The rationale for owning ZTS is simple: #msg-84067676.

[idkmybffjill]

Got it. Look forward to seeing how this does on its own.

[DewDiligence]

It's not trading yet, but the IPO priced at $26/sh. (See message #2.)

[idkmybffjill]

I'm confused; how is this trading already? I thought the IPO was tomorrow?

[DewDiligence]

Info from ZTS webcast by Mark Schoenebaum of ISI: #msg-84068724.

[DewDiligence]

Housekeeping note: Please ignore the price chart for Zetes Industries on this page; it will be removed by the iHub admins soon.

The real ZTS begins trading tomorrow (Friday).

[DewDiligence]

Zoetis (ZTS) IPO prices at $26/sh (above expected range):

http://www.reuters.com/article/2013/01/31/zoetis-idUSL1N0B0KGO20130131

Pfizer Inc's animal health subsidiary Zoetis raised $2.2 billion in its public offering on Thursday, becoming the largest IPO from a U.S. company since Facebook.

Madison, New Jersey-based Zoetis, which priced 86.1 million shares at $26 according to an underwriter, is now valued at around $13 billion. Shares of the company, which sells an array of products for livestock and domestic pets, were expected to price in a range of $22 to $25.

…The deal was between 10 and 20 times oversubscribed, according to a source with direct knowledge, meaning demand for the deal was very high [no kidding].

Zoetis, with annual sales of about $4.2 billion and 9,000 employees worldwide, is the largest player in the $22 billion animal health industry. It sells vaccines, diagnostics, anti-infectives and other medicines.

About two thirds of its sales are from products and services for livestock, including dairy and beef cattle, pigs, poultry and sheep. [Products for cattle comprise 38% of total revenues, according to the roadshow materials.] Its pet products include Revolution, a heartworm and flea-control medicine for cats and dogs, and Palladia, a cancer drug for dogs. The business began in 1952 as the Agriculture Division of Pfizer, and has steadily grown through in-house research and almost a dozen acquisitions, including the animal health units of rival drugmakers.

…Zoetis has operations in 60 countries, including emerging markets in Asia and South America. [61% of sales were ex-US in 2011 (the most recent full year for which data are available)].