The Impending Spinoff of a Spinoff: Covidien plc (COV), Pfizer Inc. (PFE), Abbott Laboratories (ABT)

Page 1 of 2

Are you ready for another health-care spinoff? Investors experienced two already in 2013 — and we’re barely into the second month of the year. Get ready now for a spinoff of a spinoff. No, AbbVie Inc (NYSE:ABBV) isn’t about to launch another company after separating from Abbott Laboratories (NYSE:ABT). Neither is Zoetis Inc (NYSE:ZTS) preparing to form another business just days after its IPO initiated by Pfizer Inc. (NYSE:PFE) .

The spinoff I’m talking about is with Covidien plc (NYSE:COV). The company, which itself is a spinoff from Tyco International Ltd. (NYSE:TYC), plans to launch its Mallinckrodt pharmaceuticals business as a publicly traded company in mid-2013. Could this impending spinoff of a spinoff present another great investing opportunity?

Covidien plc (NYSE:COV)Same kind of different
There are similarities between Covidien’s plans and those of Abbott and Pfizer. Perhaps most importantly, all three parent companies shared the same motivation in making the decision to proceed with a publicly traded spinoff.

Back in July 2011, Pfizer announced its plans to explore strategic alternatives with its animal health unit to maximize shareholder value. Nearly a year later, those plans solidified with the decision to launch Zoetis as a separate entity. Likewise, Abbott cited the prospects of improving shareholder returns when it announced the spinoff of its research pharmaceuticals business in October 2011.Both Pfizer and Abbott emphasized the advantages of the separate companies being able to focus on their different business models.

Covidien echoed these sentiments with its initial announcement about the Mallinckrodt spinoff in December 2011. Like Abbott, the company plans to retain its core medical device business. Covidien will also keep its medical supply segment. Like Pfizer, Covidien will remain significantly larger than its spinoff. Based on fiscal 2012 results, net sales for the Mallinckrodt pharmaceutical segment comprised 17% of total sales for Covidien.

Both Abbott and Covidien opted for the 100% spinoff alternative as a way to spare U.S. shareholders from having to pay taxes on the transactions. In Covidien’s case, the IRS must still give its blessing, but there shouldn’t be any issues on that front.

Different kind of different
The similarities only go so far, though. AbbVie’s Humira provided a strong growth engine for Abbott. Sales for Zoetis have grown at a faster pace than Pfizer’s other business units.  Covidien can’t make those claims for Mallinckrodt.

Source: Company 10K.

The chart above shows how sales would have looked over the past three years for the business segments that will remain with Covidien compared to what will become the new Mallinckrodt. Covidien shows a slow upward trend in sales. However, Mallinckrodt’s sales have been flat.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!