Zoetis unloading India plant to Zydus as it continues its cost cutting

The world's largest animal health company is moving forward with its pledge to become a little less large. In its second deal in two weeks, Zoetis ($ZTS) will sell a production site and some of its products in India to Zydus Cadila as part of its pledge to close 10 plants and cut about 2,500 employees as it strives to improve margins.

Zydus Cadila Managing Director Pankaj Patel

In a public filing today, Zoetis said it is selling to the Indian company a plant in Haridwar, India, and a portfolio of generic products produced there for $29 million. It said the products include medicated feed additives, anti-infectives, parasiticides, and nutritionals for livestock that it sells primarily in India. It expects to close the deal this quarter. Zoetis, which brought in $3.5 billion in revenue in the first three quarters of 2015, said the deal would not be material to its operations.

"At the time of closing, which we expect in the first quarter of 2016, Zoetis permanent employees at the Haridwar site will become employees of Zydus Cadila. We are working with the Zydus Cadila team to help ensure a smooth transition of production and employees," Zoetis said in an emailed statement.

But Zydus Cadila indicated in a statement that for itself the move was a big deal. "We believe that this strategic acquisition will strengthen our portfolio of brands and add new dimensions to our growth in the animal health business," Zydus Cadila Managing Director Pankaj Patel said in the announcement. "We see this as an opportunity to catapult our business to higher levels of excellence."

Last month, Florham Park, NJ-based Zoetis announced it was offloading three plants and the products made at them to Huvepharma, an animal health company out of Sofia, Bulgaria. Huvepharma is paying $40 million to buy manufacturing plants in Laurinburg, NC, and Longmont, CO. It also will take over the lease on a manufacturing and distribution operation in Van Buren, AR.

Zoetis has not been disclosing how many employees are affected by the sales but in May said it had a goal to trim its workforce by a total of about 25% to carve out $300 million in savings in 2017. By doing so, it expects to widen its operating margin to 34% from the 25% it has been running. Those moves came after pressure from activist investor Bill Ackman to cut costs in an effort to boost its share price. Ackman bought an 8% share in the company in 2014 and convinced Zoetis to allow him to name a couple of board members.

- here's the filing
- here's Zydus Cadila's announcement (PDF)

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