Pfizer's Zoetis wins strong response for $3.65bn debut bond sale

Wed Jan 16, 2013 3:15pm EST

NEW YORK, Jan 16 (IFR) - Pfizer unit Zoetis on Wednesday drew strong demand for its debut bond offering, a $3.65 billion four-part deal that attracted an order book of about $30 billion and allowed it to sharply tighten pricing from original guidance, according to market sources.

The company, which develops and makes animal health medicines and vaccines, built the order book within hours of announcing the deal.

That in turn allowed it to tighten guidance by 30-45 basis points from initial price guidance.

"The response to this transaction seems to show that even though the underlying tone is cautious in the high-grade market, there is still demand for new names with a growth story," said one banker.

A number of factors seem to have supported the Baa2/BBB- rated company's first ever bond offering.

The deal comes at a time when Zoetis is in the process of finalizing a $2 billion initial public offering, expected to launch in the next few days and price before month-end, according to several sources.

JP Morgan, BofA Merrill Lynch and Morgan Stanley are leading the offering.

Pfizer will exchange Zoetis Class A shares with affiliates of the underwriters for outstanding indebtedness of Pfizer. The underwriters would then sell the shares in the offering and they, and not Zoetis or Pfizer, will receive the proceeds.

After the offering, Pfizer has said it may make a tax-free distribution to its shareholders of all or part of its remaining equity stake in Zoetis.

With revenue of $4.2 billion for the year ended December 31 and products sold in more than 120 countries and across eight core species and five major product categories, Pfizer says Zoetis is the world's biggest animal health and vaccines business.

The pre-IPO bond transaction entails Zoetis selling three-, five-, 10- and 30-year bonds. Initial price talk was for Treasuries plus 125 basis points on the three-year, plus 150bp on the five-year, plus 175bp on the 10-year and plus 205bp on the 30-year.

These levels were tightened and the bond sizes set at $400 million of three-years at plus 80bp; $750 million of five-years at plus 115bp; $1.35 billion of 10-years at plus 145bp; and $1.15 billion of 30-years at plus 175bp.

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