|Kiril Domuschiev, Huvepharma president|
Zoetis, under pressure from investors to shape up, laid out a sweeping plan earlier this year to eliminate 10 plants and about 2,500 jobs as part of an effort to flush out operating costs and improve its margins. But the animal health leader did not specify at the time which plants would have to go. Now it has provided its first peek at its intentions and it is starting with a three-facility deal with a Bulgarian firm.
Zoetis ($ZTS) said in a public filing that it would offload three plants to Huvepharma, an animal health company out of Sofia, Bulgaria. The Eastern European operator will pay Zoetis $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, and pick up a portfolio of products produced and packaged primarily at the three plants.
Huvepharma is owned by investment firm Advance Properties, which is controlled in part by its president Kiril Domuschiev, who said in a statement the deal will further the company's global ambitions. The acquisition is slated to close in Q1 2016 and Zoetis said Huvepharma will take on the employees at each facility. It just didn't say how many employees that is.
Elinore White, Zoetis senior director of corporate communications, said in a phone interview that the company was not disclosing how many employees are affected by the deal. She said Zoetis has already informed all of them and that Huvepharma folks were meeting with them today.
"This is part of our effort to achieve operational efficiency and these are sites and related products we have identified as lower revenue and lower margin units that we are seeking to eliminate from our portfolio but which still have relevance for customers and Huvepharma is taking that on," White said.
Huvepharma said in a release today that the plants in North Carolina and Arkansas manufacture a variety of medicated feed additives, including Albac, which Huvepharma will sell outside of the U.S., and Inovocox, a coccidiosis vaccine for broilers. Among other products Huvepharma is buying are water soluble veterinary products R-Pen and Oxytet, which are made at the formulation facility in Colorado. Some products that are primarily sold in Europe include Lincocin Forte and Stockade. It expects to be selling all of the products by Feb. 1, 2016.
Zoetis said in May that it would close or sell 10 of its 27 plants around the world and reduce its workforce by about 25% to achieve $300 million in savings in 2017. It said it expected the effort would inflate its operating margin to 34% from the 25% it has been running. That move came in response to 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 last year and convinced Zoetis to allow him to name a couple of board members.