Zoetis shareholders indicate support for activist board seats (Deal Reporter)
Some Zoetis (NYSE:ZTS) investors appear receptive to supporting activist Pershing Square Capital Management in its pursuit of board seats at the animal health company, according to two large Zoetis shareholders.
In a move that seems designed to avoid a proxy fight, Pershing’s Bill Ackman is negotiating board representation with Zoetis, according to a Reuters report which cited unidentified sources.
The activist fund is the largest single shareholder in Zoetis, with an 8.3% stake in the animal health products maker. Sachem Head Capital, another hedge fund managed by a former Ackman protégée, has acquired a 1.6% stake in the Florham, New Jersey-based company.
One of the shareholders said “it’s a great sign” that Zoetis may be amenable to negotiating with Pershing, rather than fighting the move. Zoetis’ resistance could lead to an expensive and time-consuming proxy battle, which would be in neither side’s interest, the shareholder said. It also shows that Zoetis could potentially be “receptive” to influence from shareholders.
A second shareholder said he would “probably support” any Ackman nominees for the Zoetis board. “I don’t think the company needs an activist, but it doesn’t hurt,” said the investor. “He’s not looking to get control.”
This shareholder said his firm invested in Zoetis because it sees a macro trend of increased spending on animal and pet health, which benefits Zoetis. He noted that the stock has “already priced in a reasonably good possibility that it will get sold”.
In an interview with this news service earlier this month, Zoetis CEO Juan Ram Alaix declined to say whether Pershing was seeking board representation, calling any talks with shareholders “private”. However, the pursuit of board seats, backed by the threat of a proxy battle, is a common tactic for activists seeking to influence a company.
The deadline for board nominations for Zoetis’ annual shareholders meeting is 12 February.
Representatives for Zoetis and Pershing declined to comment. Sachem could not be reached for comment.
Pershing has not disclosed its intentions for the company, other than to hint in a letter to investors that the company could be sold. Zoetis was spun off from Pfizer (NYSE:PFE) in 2013.
“News reports indicate that Pfizer considered selling Zoetis in late 2013 and that several large, well-capitalized buyers, including Bayer (XETRA:BAYN) and Novartis (NYSE:NVS), participated in the sales process. In part because a sale would have triggered large taxes for Pfizer, Pfizer instead decided to pursue a tax-free split-off of Zoetis to its shareholders,” the letter to investors said.
Zoetis shares were trading at USD 43.24 late Friday, giving it a market value of USD 21.7bn. Its shares have gained 41% over the last year.