Pfizer Inc (NYSE:PFE) – Spinning ahead into the market
Pfizer Inc (NYSE:PFE) has been the biggest borrower of the week. An amount of $4 billion has been spread over five different issues that have maturities that range from 3-30 years. PFE is shifting this money toward redeeming 1.85 billion euros worth of notes that are due this month. Also in the offing is an early redemption of a segment of two notes that are scheduled to mature in 2014 February. Pfizer Inc. (NYSE:PFE) will be saving close to $90 million/year per in debt service. This will be dependent on the mix of retired in 2014 notes and the premium that has been paid to actually redeem them.
Towards the end of last month, the company had announced that it intends spinning-off the remainder of its interest in Zoetis Inc. (NYSE: ZTS) via an exchange offer. Zoetis was previously the company’s animal health business and had closed its IPO in 2013 February 2013. Prior to that, Pfizer Inc (NYSE:PFE) had already announced its plans to sell-off its infant-nutrition business. The big plan is to cut $1 billion in costs in 2013. There is a possibility that this move will actually benefit the company in the long run but there has to be some evidence of success of its strategy before the glasses are raised.
Of course, all these actions are meant to be the drops that will create an ocean of strength for Pfizer but the fact that its rivals are forging ahead with as much zeal, cannot be ignored.
Why do companies opt for spin-offs?
A spin-off takes place when any company takes a segment or a unit of its business and creates a completely new entity. A spin-off can be sold and the company may receive benefits in a lump-sum or it might retain control in that company and enjoy the benefits as well as the expenses. A spin-off is a pretty common business practice. It can increase the profitability of the company and also expand its presence in the market. Once the company spins-off certain segments of the business that distract it from its priorities, it then has the space to channelize its energies on its core business. And right now, in an economic landscape that is not all that bright, Pfizer Inc (NYSE:PFE) is being bright and taking the right path.