Pfizer is weighing plans to raise about $3bn this year through a part-flotation of its animal health division, as the drugs giant examines the best way to spin off a business valued at as much as $18bn.
The pharmaceuticals group, the world’s second largest by market capitalisation, has been talking to bankers about arranging an initial public offering that would look to place up to 19.9 per cent of the unit’s shares in the autumn, in what is known as an equity carve-out or partial spinoff, people familiar with the talks said.
Floating a stake in a business ahead of a spinoff is a common tactic to help establish a shareholder following for a unit, improving its ability to trade as a standalone company. It comes as the value of spinoffs globally is set to double this year.
Pfizer, whose animal health business is the largest in the world, said it was still evaluating all options for the division. It is set to announce a decision in the coming months.
Last year Pfizer revealed plans to shed both the animal health division and its infant nutrition unit as part of its efforts to streamline its activities after investor criticism over poor returns.
It appointed JPMorgan to explore alternatives for Animal Health, which has already attracted the attention of companies including Germany’s Bayer. But a full-blown sale of the business is considered unlikely because of the tax hit that would be incurred by Pfizer, some of those familiar with the process said.
Analysts at Credit Suisse last year estimated the value of the unit at $14.7bn to $18.4bn. They described it as a market leader with a 19 per cent share of an estimated $20bn market.
Morgan Stanley and Centerview are already running an auction for the infant nutrition business, with Danone and Nestlé seen by people familiar with the process as front runners. That auction is now in the second round of bidding, with offers valuing the business at about $10bn, the people said.
The spinoffs highlight the increasing trend for companies to refocus their businesses by disposing of non-core assets, often after coming under pressure from shareholders.
The global value of corporate spinoffs – whereby a division of a company is spun off as an independent listed business or is sold – is set to rise to £250bn in 2012, up 92 per cent from last year, according to analysis from Deloitte and The Spinoff Report, a specialist corporate break-up adviser.
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