Moody's rates Zoetis notes Baa2

Moody's Investors Service said it assigned a Baa2 rating to the senior notes offering of Zoetis Inc., the animal health business being separated from Pfizer Inc.

Moody's also assigned a Prime-2 senior short-term rating for Zoetis's new $1 billion commercial paper program.

The outlook is stable.

Proceeds from the note offering will be used to help fund the equity interests of Pfizer subsidiaries holding substantially all of the assets and liabilities of the animal health business that Pfizer will transfer to Zoetis in the separation transaction.

"The Baa2 rating reflects Zoetis's position as the largest stand-alone animal health company as well as strong diversity by species, therapeutic categories, geographic regions and products," Michael Levesque, a Moody's senior vice president, said in a statement.

Zoetis's rating also reflects the agency's view that fundamentals for the animal health sector will remain positive, driven by population growth, improving standards of living and rising demand for protein products, the agency said.

Product innovation will provide an additional source of growth, although innovation is not as rapid or as significant as it is in human pharmaceuticals, Moody's noted.

Key operating risk factors include economic pressures that can reduce end-user demand for protein and exposure to weather-related conditions that can affect farmers and other protein producers, the agency said.

The Baa2 rating also reflects Zoetis's moderately high financial leverage of about 3.3x pro forma for the initial public offering, but Moody's said it expects a decline to below 3.0 times over the next 18 months.

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