This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

The Deal: Pfizer's 3-Way Split Preps Company Long Term

Frank D'Amelio, Pfizer's chief financial officer, gave a succinct version of the new strategy's goal: "This is all about getting these three businesses to hum internally, to operate with excellence inside the company."

ISI Group analyst Mark Schoenebaum said in a research note that the three-split move "is really clever."

"If your entire goal is to move your stock by giving investors more clarity and allowing them to do a true sum of the parts," this is a great idea, he wrote. One of the three units could command a very high, biotech-like price/earnings ratio of 20 or higher, Schoenebaum suggests. He pegged Pfizer's P/E ratio now at about 12.5.

Dividing a diversified life sciences business into something closer to pure-play sectors and then doing a split or spin into separate companies has worked for several firms to build value in the core. Abbott Laboratories (ABT) spun off its research-based pharmaceuticals business, AbbVie (ABBV), taking it public in January. At the end of June, Covidien (COV) split off its drugs business, renamed Mallincrodt. Bristol-Myers Squibb (BMY) spun off Mead Johnson & Co.

Such reorganizations take a while, though. Abbott had announced plans to split in two as far back as October 2011. Covidien said it would make the move a few months later, in December 2011.

Pfizer already started the restructuring ball rolling by spinning out and taking public Zoetis, its animal health unit. Hiving off Zoetis through a combined initial public offering and share swap rather than an outright sale allowed Pfizer to avoid a potentially large tax bill.

The company has sold two other multibillion-dollar businesses, Capsugel for $2.4 billion in 2011 to Kohlberg Kravis Roberts and its infant nutrition unit for $12 billion to Nestle in 2012. Pfizer used the funds from those sales to buy back shares. The divestitures have helped salve the pain from Pfizer's loss of market exclusivity for its blockbuster Lipitor.

As for most of big pharma, Pfizer will continue to analyze and complete any "bolt-on" drug licensing deals and smaller acquisitions--or bigger ones--that it sees as filling out its pipeline and adding value to the company. Those will be managed company-wide, using staff with the necessary expertise from whichever unit is necessary, Read said. In 2014,the company will reveal more detailed statements for each of the three units.

2 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,943.81 +28.74 0.17%
S&P 500 1,967.57 +2.89 0.15%
NASDAQ 4,415.49 +19.2860 0.44%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs