Pfizer talks to banks about unit?s $3bn part-flotation

Anousha Sakoui and Helen Thomas

Pfizer is considering plans to raise $3bn this year through a part-flotation of its animal health division, as it examines ways to spin off a business valued at as much as $18bn.

The pharmaceuticals group, the world?s second largest by market capitalisation, has been talking to bankers about arranging an initial public offering that would place up to 19.9 per cent of the unit?s shares in the autumn, in what is known as an equity carve-out or partial spin-off, according to people familiar with the talks.

Floating a stake in a business ahead of a spin-off is a common tactic to establish a shareholder following, improving its ability to trade as a stand?alone company. The value of spin-offs globally is set to double this year.

Pfizer, whose animal health business is the largest in the world, said it was still evaluating all options for the division. It is set to announce a decision in the coming months.

Last year Pfizer revealed plans to shed the animal health division and its infant nutrition unit as part of efforts to streamline activities after investor criticism over poor returns.

It appointed JPMorgan to explore alternatives for Animal Health, which has attracted the attention of Germany?s Bayer and other companies. But a full-blown sale of the business was unlikely because of the tax hit that would be incurred by Pfizer, some of those familiar with the process said.

Analysts at Credit Suisse last year estimated the value of the unit at $14.7bn to $18.4bn. They described it as a market leader with a 19 per cent share of a market estimated at $20bn.

Morgan Stanley and Centerview are running an auction for the infant nutrition business, with Danone and Nestl? seen by people familiar with the process as frontrunners. That auction was in the second round of bidding, with offers valuing the business at about $10bn, the people said.

The spin-offs highlight an increasing trend for companies to refocus their businesses by disposing of non-core assets, often after pressure from shareholders.

The global value of corporate spin-offs – whereby a division of a company is spun off as an independent listed business or is sold – is set to rise to ?250bn in 2012, up 92 per cent from last year, according to analysis from Deloitte and The Spinoff Report, a specialist corporate break-up adviser.