Pfizer Inc. PFE today announced that, based on preliminary results,
its previously announced offer to its shareholders to exchange all, some or
none of their shares of Pfizer common stock for shares of Zoetis Inc. ZTS common stock owned by Pfizer was oversubscribed. The exchange offer
expired at 12:00 midnight, New York City time, on June 21, 2013. Under the
terms of the exchange offer, 0.9898 shares of Zoetis common stock will be
exchanged for each share of Pfizer common stock accepted in the exchange
offer.
According to the exchange agent, Computershare Trust Company, N.A.,
1,680,439,287 shares of Pfizer common stock were validly tendered and not
validly withdrawn, including 497,530,121 shares that were tendered by notice
of guaranteed delivery. Pfizer has accepted 405,117,195 of the tendered shares
in exchange for the 400,985,000 shares of Zoetis common stock owned by Pfizer.
Because the exchange offer was oversubscribed, Pfizer accepted only a portion
of the shares of its common stock that were validly tendered and not validly
withdrawn, on a pro rata basis in proportion to the number of shares tendered.
Shareholders who owned fewer than 100 shares of Pfizer common stock, or an
“odd-lot”, who have validly tendered all of their shares and made the
appropriate election, will not be subject to proration, in accordance with the
terms of the exchange offer.
Based on the total number of shares of Pfizer common stock reported to be
tendered prior to the expiration of the exchange offer, it is estimated that
approximately 24% of the tendered shares of Pfizer common stock will be
exchanged, assuming all shares tendered by guaranteed delivery procedures are
delivered under the terms of the exchange offer. This preliminary proration
factor is subject to change based on the number of tendered shares that
satisfy the guaranteed delivery procedures, as well as the number of “odd-lot”
shares that were validly tendered and not subject to proration. Pfizer expects
to announce the final proration factor promptly following the expiration of
the guaranteed delivery period, which is expected to occur on June 26, 2013.
Shares of Pfizer common stock tendered but not accepted for exchange will be
returned to the tendering shareholders in book-entry form promptly after the
final proration factor is announced.
Promptly after the final proration factor is announced, the exchange agent
will credit shares of Zoetis common stock for distribution in the exchange
offer in book-entry form to accounts maintained by the Zoetis transfer agent
for tendering shareholders who have validly tendered and not validly withdrawn
their shares of Pfizer common stock. Checks in lieu of fractional shares of
Zoetis common stock will be delivered after the exchange agent has aggregated
all fractional shares and sold them in the open market.
Following the expiration of the exchange offer, Pfizer converted all of its
Zoetis Class B common stock into Zoetis Class A common stock and, as noted
above, all such converted Class A common stock will be distributed to Pfizer
shareholders who validly tendered and did not validly withdraw their shares of
Pfizer common stock. As a result, Pfizer no longer holds any ownership
interest in Zoetis. Pfizer continues to expect the full separation of Zoetis
to be accretive on a full-year basis to Pfizer's Adjusted Diluted EPS^(2) and
Reported Diluted EPS^(3) in 2014.
J.P. Morgan Securities LLC, BofA Merrill Lynch, Goldman Sachs & Co. and Morgan
Stanley served as the dealer managers for the exchange offer.
2013 Financial Guidance^(1)
As a result of the full separation of Zoetis, Pfizer will now present Zoetis'
financial results from January 1, 2013 to June 24, 2013 as a discontinued
operation.
Pfizer is adjusting its 2013 financial guidance solely to reflect the impact
of the Zoetis exchange offer. The adjustment reflects modifications to the
following components:
* Reported Revenues, Adjusted Cost of Sales as a Percent of Revenues^(2),
Adjusted SI&A Expenses^(2), Adjusted R&D Expenses^(2) and Adjusted Other
(Income)/Deductions^(2) : Actual and projected revenue and expense
contributions of Zoetis have been excluded for the full-year 2013 from
these components. While such contributions of Zoetis also have been
excluded for the full-year 2013 from the Effective Tax Rate on Adjusted
Income^(2) , this did not result in a change in that component.
* Adjusted Diluted EPS^(2): Actual and projected financial results of Zoetis
have been excluded for the full-year 2013 through:
* The presentation of Zoetis financial results as a discontinued
operation from January 1, 2013 to June 24, 2013. Zoetis was wholly
owned by Pfizer through February 6, 2013, and 80.2% owned by Pfizer
from February 7, 2013 to June 24, 2013.
* The removal of the 80.2% of Zoetis projected financial results from
June 24, 2013 through December 31, 2013.
In addition, the weighted average shares outstanding used in the computation
of Adjusted Diluted EPS^(2) reflects the net reduction^(4) in shares of
Pfizer's outstanding common stock as a result of the exchange offer. Because
this net reduction^(4) occurred on June 24, 2013, Pfizer will recognize only a
partial-year benefit to its full-year 2013 Adjusted Diluted EPS^(2).
The impact of the removal of the full-year 2013 financial contribution of
Zoetis as well as the impact of the partial-year benefit from the net
reduction^(4) in shares of Pfizer's outstanding common stock due to the
exchange offer resulted in a $0.04 decrease to the upper and lower ends of
Pfizer's projected range for 2013 Adjusted Diluted EPS^(2).
* Reported Diluted EPS^(3):
* As previously mentioned, the financial results of Zoetis from January
1, 2013 to June 24, 2013 are presented as a discontinued operation
and, accordingly, continue to impact full-year 2013 guidance for
Reported Diluted EPS^(3).
* Full-year 2013 guidance for Reported Diluted EPS^(3) excludes the
80.2% of Zoetis projected financial results from June 24, 2013
through December 31, 2013.
* Full-year 2013 guidance for Reported Diluted EPS^(3) reflects the
partial-year benefit of the net reduction^(4) in weighted average
shares outstanding used to calculate Reported Diluted EPS^(3).
* Full-year 2013 guidance for Reported Diluted EPS^(3) was not adjusted
to reflect the gain on the disposition of shares of Zoetis common
stock.
* The impact of the removal of the financial contribution of Zoetis
from June 24, 2013 through December 31, 2013, as well as the impact
of the partial-year benefit of the net reduction^(4) in shares of
Pfizer's outstanding common stock due to the exchange offer, did not
result in a change to Pfizer's projected range for 2013 Reported
Diluted EPS^(3).
$50.8 to $52.8 billion
Reported Revenues
(previously $55.3 to $57.3
billion)
Adjusted Cost of Sales^(2) as a Percent of 18.0% to 19.0%
Revenues
(previously 19.0% to 20.0%)
$14.2 to $15.2 billion
Adjusted SI&A Expenses^(2)
(previously $15.6 to $16.6
billion)
$6.1 to $6.6 billion
Adjusted R&D Expenses^(2)
(previously $6.5 to $7.0
billion)
Approximately $800 million
Adjusted Other (Income)/Deductions^(2)
(previously approximately $900
million)
Effective Tax Rate on Adjusted Income^(2) Approximately 28.0%
Reported Diluted EPS^(3) $1.44 to $1.59
$2.10 to $2.20
Adjusted Diluted EPS^(2)
(previously $2.14 to $2.24)
(1) The 2013 financial guidance has been developed using the following
estimates, assumptions and approaches:
* Does not assume the completion of any business development transactions
not completed as of March 31, 2013, including any one-time upfront
payments associated with such transactions, except for the Zoetis exchange
offer.
* Reflects the impact of the Zoetis exchange offer, except for the gain on
the disposition of shares of Zoetis common stock.
* Excludes the potential effects of the resolution of litigation-related
matters not substantially resolved as of March 31, 2013.
* Assumes exchange rates that are a blend of the actual exchange rates in
effect during the first three months of 2013 and the mid-April 2013
exchange rates for the remainder of the year.
The reconciliation of the 2013 Adjusted Income^(2) and Adjusted Diluted
EPS^(2) guidance to the 2013 Reported Net Income Attributable to Pfizer Inc.
and Reported Diluted EPS Attributable to Pfizer Inc. common shareholders
guidance is as follows:
($ in billions, except per share amounts)
Income/(Expense) Net Income Diluted EPS
Adjusted Income/Diluted EPS^(2) Guidance ~$14.4-$15.1 ~$2.10-$2.20
Purchase accounting impacts of transactions (3.4) (0.50)
completed as of March 31, 2013
Acquisition-related costs (0.4 - 0.5) (0.06 - 0.07)
Certain other items, including (0.5 – 0.8) (0.08 - 0.12)
non-acquisition-related restructuring costs
Discontinued Operations 0.2 0.03
Reported Net Income Attributable to Pfizer ~$9.9-$11.0 ~$1.44-$1.59
Inc./Diluted EPS^(3) Guidance
(2) "Adjusted Income" and its components and "Adjusted Diluted Earnings Per
Share (EPS)" are defined as reported U.S. generally accepted accounting
principles (GAAP) net income^(3) and its components and reported diluted
EPS^(3) excluding purchase accounting adjustments, acquisition-related costs,
discontinued operations and certain significant items. Adjusted Cost of Sales,
Adjusted Selling, Informational and Administrative (SI&A) expenses, Adjusted
Research and Development (R&D) expenses and Adjusted Other (Income)/Deductions
are income statement line items prepared on the same basis, and, therefore,
components of the overall adjusted income measure. As described under Adjusted
Income in the Management's Discussion and Analysis of Financial Condition and
Results of Operations section of Pfizer's Form 10-Q for the fiscal quarter
ended March 31, 2013, management uses adjusted income, among other factors, to
set performance goals and to measure the performance of the overall company.
We believe that investors' understanding of our performance is enhanced by
disclosing this measure. See the accompanying reconciliations of full-year
2013 guidance for adjusted income and adjusted diluted EPS to full-year 2013
guidance for reported net income^(3) and reported diluted EPS^(3). The
adjusted income and its components and adjusted diluted EPS measures are not,
and should not be viewed as, substitutes for U.S. GAAP net income and its
components and diluted EPS.
(3) “Reported Net Income” is defined as net income attributable to Pfizer Inc.
in accordance with U.S. GAAP. “Reported Diluted EPS” is defined as reported
diluted EPS attributable to Pfizer Inc. common shareholders in accordance with
U.S. GAAP.
(4) The impact of the Zoetis exchange offer on the full-year weighted average
shares outstanding also includes the negative impact on anticipated full-year
share repurchases because of the prohibition imposed by law on share
repurchases during and for 10 business days after the exchange offer period.
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