Billionaire Ackman Announces Big Stake in Zoetis

Have you ever heard of Zoetis (NYSE: ZTS)? I know I hadn’t. That all changed today when the Wall Street Journal broke news that billionaire hedge fund manager Bill Ackman has taken a big stake in Zoetis, an animal healthcare company.
News of Ackman’s stake in Zoetis broke around 3:30pm, just minutes away from the close of trading. Still, traders had time to send shares higher by almost 9% on what was otherwise a very flat day of trading for the stock.
Ackman’s Pershing Square Capital built a $2 billion stake in the company, roughly 10% of its shares, along with another hedge fund friendly to Ackman’s, Sachem Head Capital Management.
Here’s a glimpse at what the stock did after news broke.
11.11.14 ZTS

Source: Yahoo Finance

Zoetis was spun off of Pfizer (NYSE: PFE) early last year. The maker of vaccines and other medical treatments for livestock and companion animals – a.k.a. pets – is the largest company in the animal health industry. It competes against the animal health divisions of Merck (NYSE: MRK), Sanofi (NYSE: SNY), Eli Lilly (NYSE: LLY) and Bayer (OTCMKTS: BAYRY).
Below is a table used to illustrate 2013 market share for the industry that appeared in the Wall Street Journal article that broke this story.
Animal Health Market Share 2013 11.11.14

Source: The Wall Street Journal

Considering Ackman’s push towards a hostile takeover of Botox-maker Allergan (NYSE: AGN) by Valeant (NYSE: VRX), the Wall Street Journal report suggests that the Zoetis stake could be his backup plan. If he is unable to orchestrate an acquisition of Allergan by Valeant, he could use his influence in both companies to push Valeant to buy Zoetis.
Others have suggested that Valeant could buy both Allergan and Zoetis.
The Wall Street Journal got hold of this story via “people familiar with the matter” rather than an SEC filing made by Pershing Square Capital. Still, the market seems to believe the report, as evidenced by the 9% push for Zoetis in the final half-hour of Tuesday trading.
Ackman is known for big public gestures and presentations when it comes to his investments so I doubt he’ll remain quiet on this one. We’ll continue to follow this story as it develops. But for now, we know Ackman has been actively involved in merger and acquisition activity in the pharmaceutical industry. And we know Ackman has taken a big stake in Zoetis. What we don’t yet know is how those two relate.

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