William Ackman, a big-money activist investor, has taken a stake of around $2 billion in Zoetis Inc. and could prod the animal-health company to sell itself to a large drug manufacturer like Valeant Pharmaceuticals International Inc., the Wall Street Journal reported Tuesday, citing unnamed informed sources.
Shares of Zoetis (NYSE:ZTS) jumped almost 9 percent on the news, closing at $43.72, near their 52-week high, and rising further in after-hours trading.
Zoetis responded to the report with the following statement:
"Zoetis acknowledged that the company received a call from Bill Ackman of Pershing Square indicating that the firm has made an investment in Zoetis. Zoetis declined to comment on details of that conversation.
"We are preparing for our upcoming Investor Day on Tuesday, Nov. 18, and we look forward to sharing more details about the company’s business model and growth strategies with the investment community at that time."
Ackman’s Pershing Square Capital Management LP has built the stake, which amounts to some 10 percent of Zoetis, with fellow hedge fund Sachem Head Capital Management LP, the Journal said. Sachem Head is run by Scott Ferguson, an Ackman protégé.
Zoetis, which was spun off Pfizer Inc. last year, makes vaccines and treatments for livestock and household pets. With $4.6 billion in sales in 2013, it’s the largest company in the animal-health sector and one of the latest corporations to be targeted by shareholder activists. Meanwhile, Pershing Square and Valeant together are trying to acquire Allergan Inc. for $53 billion, which the Botox maker is resisting.
Acquiring Zoetis could be a fallback plan for Valeant should it fail to take over Allergan, or Valeant might also buy both companies, the Journal’s sources said.
The animal-health industry has been an active field in the recent mergers-and-acquisitions boom. In April, Novartis AG agreed to sell its animal-health unit to Eli Lilly & Co. for $5.4 billion. The deal is expected to boost Lilly’s position in the industry to No. 2 behind Zoetis.