29 April 2024

3 minute read

By: Laurence Williams

Zoetis Inc. (NYSE:ZTS) and Phibro Animal Health Corporation (Nasdaq: PAHC) today announced that they have entered into a definitive agreement where Phibro Animal Health will acquire Zoetis’ medicated feed additive (MFA) product portfolio, certain water soluble products and related assets for $350 million, subject to customary closing adjustments. This transaction is expected to be complete in the second half of calendar year 2024.

Both Zoetis and Phibro Animal Health have a longstanding commitment to the production animal health sector. The acquired product portfolio, which generated approximately $400 million in revenue in 2023, is comprised of more than 37 product lines that are sold in approximately 80 countries. Also included in the agreement are six manufacturing sites, four in the U.S., one in Italy and one in China. More than 300 Zoetis colleagues who support manufacturing, distribution and commercial activities are expected to transition to Phibro Animal Health.

This transaction demonstrates Zoetis’ disciplined capital allocation strategy to focus its investments on solutions for animal health, productivity and sustainability. With this divestiture, Zoetis can focus its livestock investments in other solutions, including vaccine, biologic and genetic programs.

“We remain committed to providing innovative solutions to our livestock customers,” said Kristin Peck, Chief Executive Officer of Zoetis. “We believe that the long-term value of the transferred portfolio will be fully realized with Phibro Animal Health which will continue to expand its reach given their strong relationships with customers worldwide.”

Zoetis’ strong portfolio of MFA and water soluble products across cattle, swine and poultry will complement and expand Phibro Animal Health’s species and product portfolios, helping customers meet the highest standards of animal care, prevent disease, and enhance nutrition. On a combined basis for the acquisition, Phibro Animal Health sales in the last twelve months would have been approximately $1.4B. The portfolio is expected to boost Phibro Animal Health’s profitability and EBITDA margin and be accretive to its Adjusted Earnings Per Share. The acquisition is expected to be funded primarily with debt, and Phibro Animal Health has received financing commitments from a number of key relationship banks. Phibro Animal Health expects to have net leverage of 3.5-4.0x Debt / Adjusted EBITDA at close and will target net leverage of below 3.0x by its fiscal year end June 30, 2027.

“Over a long period of time, Zoetis has built a valuable, high-quality and reliable source of medicated feed additives around the globe,” said Jack C. Bendheim, Chairman, President and Chief Executive Officer of Phibro Animal Health. “This investment will enhance, diversify and broaden our portfolio globally and help us continue to deliver value to our customers and to our shareholders. We believe our cash generation will allow for continued investment into our higher growth businesses of Nutritional Specialties, Companion Animal, and Vaccines. I am confident we have the right capabilities to integrate and strengthen this business. I look forward to collaborating with the Zoetis team and welcoming new colleagues to Phibro Animal Health to support this portfolio.”

Zoetis and Phibro Animal Health will work closely with their colleagues and customers to ensure a smooth transition and continued supply of these important products.

Guggenheim Securities, LLC is acting as exclusive financial advisor to Zoetis and Wachtell, Lipton, Rosen & Katz is acting as legal advisor. Citi is acting as exclusive financial advisor to Phibro and Kirkland & Ellis LLP is acting as legal advisor.

Phibro Animal Health will be hosting an investor call on April 29 at 8:30 am. Interested parties are invited to listen to the conference call and view the presentation slides by visiting https://investors.pahc.com. The discussion will also be available by dialing +1 (888) 596-4144 in the U.S. and Canada, or +1 (646) 968-2525 for international callers. Provide the conference ID 6159146.

A real time audio webcast can be accessed via Phibro’s investor relations website at https://investors.pahc.com. Conference call slides will be posted to the website in advance of the call.