Valeant Reportedly Makes Bid for Zoetis in "Mega Deal"

Published: Jun 29, 2015

Valeant (VRX) Reportedly Makes Bid for Zoetis (ZTS) in
June 26, 2015
By Riley McDermid, Breaking News Sr. Editor

Valeant Pharmaceuticals International, Inc. has made an initial bid for animal health company Zoetis , the Wall Street Journal reported Thursday, after the company slashed jobs and began to attract notice from larger rivals like Bayer .

Citing people familiar with the matter, the WSJ reported the bid, which did not name terms, was preliminary. Zoetis has long been linked to Valeant as a potential target, but a wave of dealmaking and consolidation in the space has made it an attractive target for companies including Allergan Inc. , Endo Pharmaceuticals , Actavis plc and Shire . Neither Zoetis or Valeant would comment on the report Friday.

Zoetis is one of the largest developers and manufacturers of animal health medications and vaccines in the world, with annual revenue in 2014 of $4.8 billion. It employs about 10,000 people worldwide and sells products in more than 120 countries.

Valeant’s approach may have been spurred by a more streamlined business model at the company. Two weeks ago Zoetis , a spinoff of Pfizer Inc. , filed a Worker Adjustment and Retraining Notification Act notice with the State of New Jersey last week indicating it planned to cut about 165 jobs by Dec. 31, 2016. The job cuts will take place at world headquarters in Florham Park, N.J.

“This anticipated reduction is part of a comprehensive program announced on May 5, 2015, to simplify Zoetis operations worldwide, improve our cost structure and better allocate resources to key growth opportunities,” said Elinore White, company spokeswoman in a statement. “The implementation of this plan will allow Zoetis to become more competitive by being more focused and cost-efficient, while taking full advantage of our company’s scale and business model.”

Valeant CEO Mike Pearson said this winter that at that time, Valeant remained uninterested in Zoetis. “We have no interaction or contact with them.” I think it’s highly unlikely anything is going to happen with Zoetis,” he said, adding that Valeant would, however, be interested in buying an animal health group focused solely on pets.

In February activist hedge funder Bill Ackman finally had his way Zoetis, after the firm said it would be taking on a representative from his Pershing Square Capital Management to sit on its board of directors—a prime perch from which to watch Ackman’s significant stake in Zoetis.

As such, Zoetis said William Doyle, an Ackman acolyte, will now be appointed to its board of directors. It’s a plum job for Doyle, who is likely being rewarded for initiating Pershing’s top trade last year when he pushing the hedge fund to bet on a hostile takeover of Botox maker Allergan Inc. . That deal ultimately fell through, but because of Ackman’s 9.7 stake in the company, Pershing walked off with a cool $2.7 billion.

“We welcome Bill to the Zoetis Board,” Zoetis CEO Juan Ramón Alaix, said in a statement, referring to Doyle.

Ackman has long meditated on Zoetis’ future. He told traders in October that Allergan and Zoetis (ZTS) are his first healthcare positions in 11 years, but that he’s “open to more healthcare situations in the future.”

Ackman said that Zoetis in particular had been educational, saying Pershing views ZTS as “strategically valuable, good durability of cash flow, able to work with management, and opportunities in cost cutting.”

Ackman said he was “concerned” Zoetis would be a distraction to the Allergan situation and “confusing to the market” but has apparently put those concerns to rest now that Allergan is safely married off.

Ackman himself has had a lot to say about the Valeant/Allergan deal, saying last November that his “biggest mistake” in the pursuit was launching a tender offer, BioSpace reported exclusively at the time.

According to sources at an internal ISI meeting, Ackman said the tender offer for Allergan was “purely optical” to get the company to yield to arbitration pressure and “did nothing really other than incur legal costs.”

As Rumors Swirl About GlaxoSmithKline Bid, Who Could Suitors Be?
Rumors are swirling that Swiss-based Roche and U.S.-based Johnson & Johnson are eying the U.K. company for approximately $143 billion. But Roche and J&J aren’t the only companies though who have been thought could go after the elephant that is Glaxo.

Last month there was buzz that Pfizer Inc. was considering acquiring Glaxo, a year after it failed to acquire AstraZeneca PLC . Just this month over a third of respondents in a poll conducted by BioSpace believe that AstraZeneca PLC could be in the running to acquire struggling GlaxoSmithKline (GSK).

So BioSpace wants to ask our readers again what they predict for this new dealmaking bonanza. Will Glaxo go—and if so, to whom?

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