Upcoming Interesting Spin-offs

There are some big and interesting spin-offs coming up within the next couple of months.

Liberty Media

Liberty Media (LMCA) is spinning-off Starz, the premium cable channel in mid-January. After the spin-off, Starz is looking to sell itself. In fact, Liberty is already sending feelers out to potential interested parties such as CBS, Fox, Viacom and Univision.

Barron’s had an interesting sum-of-parts valuation of Liberty couple weeks back. It valued Starz at $125, about $15 above the Friday closing price of $110. I personally have not valued each of the businesses, but there are two potential big risks here:

  • The majority of Liberty’s valuation is based on Sirius. 
  • Netflix outbid Starz to carry Disney content after 2016. This could have an effect on Starz valuation going forward. Starz is trying to develop more original content to offset this loss.

There are a lot of believers in Liberty such as Warren Buffett and David Einhorn. However, both those investors were holding Liberty before the recent run up of the stock price.

Pfizer

Pfizer (PFE) is spinning-off its Animal Health Unit, Zoetis. It plans to launch a $4 billion IPO in January or February, valuing the Zoetis at around $20 billion. After the IPO, it plans to distribute the remaining 80% to shareholders.

 Check out the latest S1 here

I am avoiding holding Pfizer because

  • I am not a big fan of big pharmaceutical companies. They have to keep coming up with new drugs to maintain and grow revenue.
  • Zoetis valuation, even at $20 billion, will be around 10% of Pfizer’s market capitalization.

Although, Zoetis has been growing, it looks expensive from a brief reading of the S1.

News Corporation

News Corp (NWSA) is spinning-off its publishing unit early next year. There has not been much new information on this spin-off except it named Robert Thomson the CEO of the company.

Disclosure: I do not own NWSA, PFE, or LMCA

Pfizer Spin-off, Zoetis

Zoetis LogoOne spin-off that I am keeping a track of is the Pfizer spin-off of its animal unit, Zoetis.

“Zoetis is a global leader in the discovery, development, manufacture and commercialization of animal health medicines and vaccines, with a focus on both livestock and companion animals.” The company had revenues of $4.2 billion and $245 million in fiscal year 2011. In the first six months of 2012, the company had revenue of $2.14 billion and net income of $284 million.

The pricing and terms are not set, but based on the most recent S1 filing, the company is offering Class A shares (one vote per share on all matters) to the public. Class B shares, which have ten votes per share for election of directors and one vote per share for all other matters, will be held by Pfizer.

Pfizer “may make a tax-free distribution to its stockholders of all or a portion of its remaining equity interest in us, which may include a distribution effected as a dividend to all Pfizer stockholders or a distribution in exchange for Pfizer shares or other securities (or another similar transaction).”

Analysts are valuing Zoetis at over $15 billion. Once the terms come out, I will have more analysis.

Check out the S1 analysis here.

Disclosure: I do not own PFE.