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4-Traders Homepage  >  Equities  >  Xetra  >  Bayer AG    BAYN   DE000BAY0017

BAYER AG (BAYN)

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Pfizer CEO: spin-off more likely for animal health

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03/12/2012 | 03:47pm CET

Pfizer Inc (>> Pfizer Inc.) is more likely to spin off its animal health unit than sell it outright, reflecting the expected investor appeal of such a large standalone business, its chief executive said on Monday.

Pfizer Inc (>> Pfizer Inc.) is more likely to spin off its animal health unit than sell it outright, reflecting the expected investor appeal of such a large standalone business, its chief executive said on Monday.

No final decision has been taken but Ian Read told Reuters there were clear attractions for shareholders in a tax-free spinoff of the operation, which is the biggest in the industry.

"I would probably handicap animal health as more likely to be a spin than a sale," the CEO of the world's biggest drugmaker said in an interview in London.

Read, who took over as Pfizer chief in December 2010 at a challenging time, is shrinking the group by divesting non-core businesses, including veterinary medicine and infant nutrition.

Pfizer is losing billions of dollars of revenue from cholesterol blockbuster Lipitor, which is now off patent in many markets, although Read said he hopes to carve out a new future for the medicine as an over-the-counter (OTC) product.

The nutrition business is widely expected to be sold outright for around $10 billion. Bidders were asked to submit offers last week, with Nestle SA (>> Nestle SA) and a partnership of Danone SA and Mead Johnson Nutrition Co (>> Mead Johnson Nutrition CO) seen as frontrunners.

The process for animal health, however, is less well advanced and the case for a sale less obvious. Pfizer faces a hefty tax bill if it sells outright and any buyer would also faces substantial antitrust hurdles.

"It's the largest animal health business and it would stand alone as an individual company. There's huge interest among investors to own a company like that," Read said.

"With nutritional there are lots of companies that are already in the nutritional business and have it as a major development area."

Speculation about a possible sale of animal health, which analysts believe could be worth $15-20 billion, was fuelled last week by reports that Novartis AG (>> Novartis AG) had made an approach that was rebuffed by Pfizer, while Bayer AG (>> Bayer AG) was also weighing a move.

The plans to dispose of both units, which Pfizer has said would be completed between July 2012 and July 2013, follows a far-reaching review and a decision to focus on core pharmaceutical operations.

The outcome of that review was to focus on five core areas of drug research, while maintaining a strong presence in generic and OTC medicines.

Read said Pfizer hoped to introduce a non-prescription form of Lipitor, but this would not happen in the short term. Pfizer is currently discussing the issue with the Food and Drug Administration, which is seeking public comment on the idea of making more medicines available OTC.

"We would like to sell it over the counter. We're in discussions and development with the FDA on that," Read said.

In the past, Pfizer has been a mergers and acquisitions machine, snapping up smaller rivals and partners to build out its portfolio.

It will continue to look for bolt-on acquisitions, including deals that could be "multiples" of 2010's $3.6 billion purchase of King Pharmaceuticals, Read said. But he did not see a need for another large-scale deal like the $67 billion purchase of Wyeth in 2009.

Asked about the possibility of buying out Bristol-Myers Squibb Co (>> Bristol Myers Squibb Co.), its partner on promising anti-clotting drug Eliquis, Read said: "I'm not sure that would create shareholder value. I think the partnership is working very well."

(Editing by Chris Wickham)

By Ben Hirschler and Kate Kelland

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Financials (€)
Sales 2017 49 087 M
EBIT 2017 9 510 M
Net income 2017 5 481 M
Debt 2017 10 233 M
Yield 2017 2,73%
P/E ratio 2017 16,35
P/E ratio 2018 14,73
EV / Sales 2017 1,97x
EV / Sales 2018 1,91x
Capitalization 86 251 M
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Mean consensus OUTPERFORM
Number of Analysts 26
Average target price 111 €
Spread / Average Target 6,7%
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NameTitle
Werner Baumann Chairman-Management Board
Werner Wenning Chairman-Supervisory Board
Johannes M. Dietsch Chief Financial Officer
Katharina Jansen Head-Science & Research
Hartmut Klusik Human Resources, Technology & Sustainability
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