Just days after Zoetis ($ZTS) announced better-than-expected results in its first quarter, the activist investor who once told the company to shape up or sell itself--William Ackman of Pershing Square Capital--seems to be backing off of the animal health giant. On May 9, Pershing planned to sell 16.85 million shares of the company for about $800 million, according to anonymous sources who spoke to the New York Times.
Zoetis’ shares have risen 8.6% since Pershing Square bought up 8.5% of the company for $1.5 billion in late 2014. The hedge fund will still own 25 million shares after the transaction, which will be managed by Bank of America Merill Lynch and Credit Suisse, according to the Times. But Pershing Square’s William Doyle, who joined Zoetis’ board last year, will be stepping down this week.
Pershing Square was instrumental in getting Zoetis CEO Juan Ramón Alaix and his management team to focus on improving the company’s bottom line. During Zoetis’ first-ever Investor Day in New York in November 2014, Ackman reportedly spoke privately to investors, griping that the company’s cost structure was higher than that of its rivals. Pershing Square worked with Sachem Head Capital Management to build up a significant ownership stake in Zoetis.
Pundits on Wall Street speculated that Ackman would pressure Zoetis into a merger. But instead, the company embarked on a major reorganization, slashing 5,000 underperforming SKUs, exiting 5 manufacturing plants (with 5 more planned) and eliminating 165 jobs in New Jersey. During the earnings announcement earlier this month, Alaix predicted Zoetis would outperform its original goal of saving $300 million a year by 2017, thanks to the resulting decline in general and administrative expenses.
As for Ackman, he remains deeply involved in trying to turn around Valeant ($VRX), the drug company in which Pershing Square holds a 9% stake. Ackman’s effort to forge a merger between the Canadian drugmaker and Allergan ($AGN) in 2014 failed, and now Valeant is facing an earnings restatement, allegations of channel-stuffing, and most recently, horrible earnings and a lowering of its guidance for this year.
Shares of Zoetis, which had risen 14% since March to $47.50, dipped about 2% in morning trading on May 10.
- here’s the New York Times story (sub. req.)
Related Articles:
Embattled Zoetis courts investors as activist shareholder Ackman looms
Report: Activist investor Ackman pushing for Zoetis board positions
Zoetis CEO Alaix on the Q1 surprise and brighter 2016 forecast
Activist Ackman vows to intervene after disastrous day at Valeant