Bill Ackman's Pershing Square Capital Management LP has acquired a $1.8-billion activist stake in animal drug maker Zoetis Inc., sending its shares to a record high Tuesday.
Ackman informed Zoetis of the stake in a phone call, the company said in a statement, without providing further details. Pershing Square and another fund, Sachem Head Capital Management LP, took the stake to increase shareholder returns at the company, according to a person familiar with the matter. Activists often agitate for steps such as a sale, restructuring or increased dividends and share buybacks.
Pershing Square amassed a stake in Zoetis of about 41.8 million shares through stock and options, while Sachem has about 1.4 million, said the person, who asked not to be identified because the stakes aren't yet public. Zoetis, based in Florham Park, N.J., said it is scheduled to meet with investors on Nov. 18.
"We look forward to sharing more details about the company's business model and growth strategies with the investment community at that time," Zoetis said in a statement. Activist investors tend to buy at least 5 per cent of a company's stock and flag their intention to engage management and the board when they disclose their holdings in a filing with the U.S. Securities and Exchange Commission.
Options for Zoetis Pershing Square, which oversees about $18-billion, could use the stake to force Zoetis to sell itself to companies including Bayer AG, Merck & Co. and Eli Lilly & Co., which all have animal health businesses. Pershing Square also holds a stake in Allergan Inc., and Ackman has been pushing that company to agree to a hostile takeover by Valeant Pharmaceuticals International Inc. Valeant could seek to acquire Zoetis if it can't get Allergan, or it may try to buy both, the Wall Street Journal reported Tuesday, citing people familiar with the matter.
Valeant isn't currently considering a deal for Zoetis, said another person familiar with the matter. Zoetis's valuation is already high and it lacks overlapping businesses that Valeant could use to cut costs, said the person.
Sachem Head is an activist hedge fund founded by Scott Ferguson in 2012 after he left Pershing Square. It manages about $2-billion. The firm last month targeted CDK Global Inc., the information technology provider to automobile dealers that was just spun off from Automatic Data Processing Inc. It has previously taken aim at hair-care products maker Helen of Troy Ltd., and owns stakes in Cheniere Energy Inc., Time Warner Cable Inc. and Signet Jewelers Ltd.
Ferguson and Ackman, as well as representatives for Sachem Head and Pershing Square, didn't immediately respond to e-mails seeking details of what the activists will ask for. Calls and e-mails to Laurie Little, a spokeswoman for Valeant, weren't immediately returned.
Zoetis shares gained 8.9 per cent to close at $43.72 in New York, the highest since the company's initial public offering last year and giving it a market value of $21.9-billion. Valeant gained 1.6 per cent to $130.03.
Pershing Square took a 9.7-per-cent stake in Allergan this year before Valeant's offer for the company became public. The billionaire investor has called for the replacement of Allergan board members opposed to a merger.
Zoetis was separated last year from Pfizer Inc. through an initial public offering.