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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.
Zoetis' over $2 billion public offering is the largest from a U.S. company since Facebook raised $16 billion last May. The deal was between 10 and 20 times oversubscribed, according to a source with direct knowledge, meaning demand for the deal was very high.
"This may usher in the first few tentative steps towards larger deals -- it may crack the door open just a little further," said Lee Simmons, IPO editor at Dun & Bradstreet. "But I'd call it a very slow snowball event because generally there is that continued pessimism in the markets about large buzzy deals."
U.S. IPO proceeds, excluding Facebook, fell 35 percent in 2012, according to Thomson Reuters data.
The deal for Zoetis comes as its parent Pfizer, the world's biggest drugmaker, is divesting its non-pharmaceuticals units in order to focus on its core prescription drugs business.
Last April, Pfizer sold its infant nutrition business to Nestle SA NESN.VX for $11.9 billion.
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. 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.
French drugmaker Sanofi (SASY.PA), Merck & Co (MRK.N) and Eli Lilly and Co (LLY.N) have held onto their animal health units because of their dependable sales growth. Although profit margins on veterinary products are far lower than human drugs, their patent expirations are not as big a concern.
Zoetis has operations in 60 countries, including emerging markets in Asia and South America.
"As the biggest firm in the industry, Zoetis has scale that gives it significant advantages over competitors," Morningstar analyst Jim Krapfel said in a report earlier this week. "Its large product portfolio can justify an extensive salesforce and reduce distribution costs while smaller competitors must rely on expensive and less efficient distributors."
Pfizer will control roughly 80 percent of Zoetis after the IPO, which accounts for 413.9 million Class B shares. Juan Ramon Alaix, who served as Pfizer's animal health president, will be Zoetis' chief executive officer. Pfizer Chief Financial Officer Frank D'Amelio will serve as board chairman.
Large corporations like Pfizer are increasingly using spinoffs as a way to unlock value for shareholders.
In 2012, spin-offs and divestitures accounted for nearly 47 percent of all deals, the highest percentage in 20 years, according to Thomson Reuters data.
Earlier in January, Cincinnati Bell Inc (CBB.N) spun off its data center unit CyrusOne Inc (CONE.O) through an initial public offering. Shares of CyrusOne are up around 12 percent since their market debut.
Last October, WhiteWave Foods Co WWAV.N spun off from dairy company Dean Foods Co (DF.N). Shares of WhiteWave are down slightly since the offering.
"The financial engineering we see with these various spinoffs is really helping to unlock some value with larger companies," Mike Simmons, managing director and partner at HighTower Advisors, said on Thursday. HighTower manages $25 billion in client assets.
Zoetis will list its shares on the New York Stock Exchange under the symbol "ZTS."
Reporting By Olivia Oran and Ransdell Pierson in New York; editing by Carol Bishopric and Andrew Hay