SEC Division of Corporation Finance no-action letter: Pfizer Inc.

Securities Exchange Act of 1934 Regulation Blackout Trading Restriction

May 21, 2013

Response of the Office of Chief Counsel Division of Corporation Finance

Re:

Pfizer Inc. (“Pfizer”) Incoming letter dated March May 21, 2013

Capitalized terms have the same meaning as defined in your letter.

You have asked for the Division’s view as to whether the Exchange Offer of Pfizer Common Stock for Zoetis Class A Common Stock will qualify for the exemption under Rule 101(c)(9) of Regulation BTR, in the event the Suspension results in a “blackout period,” as defined in Rule 100(b) of Regulation BTR.

Based on the facts presented, the Division is of the view that the Exchange Offer will qualify for the Rule 101(c)(9) exemption, such that directors and executive officers of Pfizer may continue to participate in the Exchange Offer during the pendency of any Suspension that results in a blackout period. In reaching this conclusion, we note in particular your representations that:

the Exchange Offer is solely for the purpose to effect the divestiture of Zoetis from Pfizer;

the Exchange Offer is subject to, and will comply with, Exchange Act Rule 13e-4 or Regulation 14D under the Exchange Act;

the Suspension is imposed by the Third-Party Administrators to enable them to allow participants and beneficiaries of the Plans to elect to participate in the Exchange Offer while maintaining an accurate accounting of the account balances of such participants and beneficiaries; and

Pfizer directors and executive officers would continue to be permitted to tender into the Exchange Offer during a blackout period, but would not otherwise be permitted to directly or indirectly purchase, sell or otherwise acquire or transfer Pfizer common stock during such blackout period if the shares involved were or would be acquired in connection with service or employment as a director or executive officer.

This position is based on the representations made to the Division in your letter. Different facts or conditions might require a different conclusion.

Sincerely,

Anne Krauskopf Senior Special Counsel

Incoming Letter:

The Incoming Letter is in Acrobat format.

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SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
1440 NEW YORK AVENUE, N.W. FIRM/AFFILIATE OFFICES WASHINGTON, D.C. 20005-21 I I BOSTON CHICAGO TEL: (202) 37 1-7000 HOUSTON LOS ANGELES FAX: (202) 393-5760 NEW YORK www.skadden.com PALO ALTO DIREcT DIAL WILMINGTON 202-371-7180 BEIJING DIRECf FAX BRUSSELS 202·66 I ·90 I 0 FRANKFURT EMAIL ADDRESS HONG KONG BRIAN. BREHENY@SKADDEN. COM LONDON MOSCOW MUNICH PARIS SAO PAULO SHANGHAI SINGAPORE Securities Exchange Act of 1934 SYDNEY

TOKYO

TORONTO

VIENNA

Rule 1 01 ( c )(9) of Regulation BTR
May 21,2013
BY EMAIL
Mr. Thomas J. Kim

Associate Director and Chief Counsel

Office ofChief Counsel

Division ofCorporation Finance

1 00 F Street, N .E.

Washington, DC 20549

Re: Pfizer Inc. Blackout Trading Restriction (Regulation BTR) Dear Mr. Kim:
We are writing on behalf of our client, Pfizer Inc. ("Pfizer"), in connection with an exchange offer that potentially would be commenced on or after May 22, 2013. In the exchange offer (the "Exchange Offer"), Pfizer will offer holders ofits common stock the opportunity to exchange all or a portion oftheir holdings of Pfizer common stock for shares of common stock ofZoetis Inc. ("Zoetis"), as described below.
Section 306(a)(l) ofthe Sarbanes-Oxley Act of2002 ("Sarbanes-Oxley") and Rule
101(a) of Regulation BTR1 make it "unlawful for any director or executive officer of an issuer of any equity security (other than an exempt security), directly or indirectly, to purchase, sell or otherwise acquire or transfer any equity security ofthe issuer (other than an exempt security) during any blackout period with respect to such equity security, if such director or executive 17 C.F.R. §245.10l(a).

May 21,2013 officer acquires or previously acquired such equity security in connection with his or her service or employment as a director or executive officer." Section 306(a)(3) of Sarbanes-Oxley granted the U.S. Securities and Exchange Commission (the "Commission") the authority to adopt "appropriate exemptions" from Section 306(a)(l). Pursuant to this authority, the Commission adopted a number of exemptions, including one related to "[a]ny acquisition or disposition of equity securities in connection with a merger, acquisition, divestiture or similar transaction occurring by operation oflaw."2 Because it is possible that a blackout period (as that term is defined by the Commission in Rule 1 OO(b) ofRegulation BTR)3 may be triggered during the Exchange Offer, we are seeking confirmation that the Staff ofthe Commission's Division of Corporation Finance (the "Staff') does not object to Pfizer's interpretation that the disposition of equity securities in connection with the Exchange Offer qualifies for the exemption under Rule 10l(c)(9) of Regulation BTR. BACKGROUND A. Parties to the Transaction

1. Pfizer
   Pfizer is a publicly held corporation incorporated in Delaware. Pfizer is a global biopharmaceutical company engaged in the discovery, development and manufacturing of health care products. Pfizer reported revenues of approximately $59.0 billion for the year ended December 31,2012. Pfizer is also a well-known seasoned issuer, subject to the registration and reporting requirements ofthe Securities Exchange Act of 1934, as amended (the "Exchange Act"). Accordingly, it files with the Commission periodic reports, proxy statements and other information relating to Pfizer's business, financial results and other matters. Pfizer is current in its Exchange Act reporting requirements. As of February 21, 2013, there were 7,189,061,853 shares ofPfizer common stock, par value $0.05 per share ("Pfizer Common Stock"), outstanding. Pfizer Common Stock is registered under Section 12(b) ofthe Exchange Act and is listed on the New York Stock Exchange (the "NYSE"). 17 C.F.R. §245.101(c)(9). 17 C.F.R. §245.100(b).

May 21,2013
2. Zoetis
Zoetis is a publicly held corporation incorporated in Delaware. 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. Zoetis reported revenues of approximately $4.3 billion for the year ended December 31, 2012. Zoetis completed its initial public offering on February 6, 2013. Zoetis is subject to the registration and reporting requirements ofthe Exchange Act, and Zoetis files with the Commission periodic reports, proxy statements and other information relating to its business, financial results and other matters. Zoetis is current in its Exchange Act reporting requirements. As of March 22, 2013, there were 99,015,000 shares of Zoetis Class A common stock, par value $0.01 per share ("Zoetis Class A Common Stock"), outstanding, and 400,985,000 shares of Zoetis Class B common stock, par value $0.01 per share ("Zoetis Class B Common Stock" and, together with Zoetis Class A Common Stock, "Zoetis Common Stock") outstanding. Zoetis Class A Common Stock is registered under Section 12(b) and is listed on the NYSE. The rights of the holders of the shares of Zoetis Class A Common Stock and Zoetis Class B Common Stock are identical, except with respect to voting and conversion. Each share of Zoetis Class A Common Stock and Zoetis Class B Common Stock is entitled to one vote per share for all matters submitted to a vote of stockholders other than with respect to the election of directors. With respect to the election of directors, each share of Zoetis Class B Common Stock is entitled to 10 votes per share, and each share of Zoetis Class A Common Stock is entitled to one vote per share. In addition, each share of Zoetis Class B Common Stock held by Pfizer or one of its subsidiaries is convertible into one share of Zoetis Class A Common Stock at any time, but is not convertible if held by any other holder. Pfizer currently owns 100% of Zoetis Class B Common Stock and no shares of Zoetis Class A Common Stock. This equates to approximately 80.2% ofthe economic interest and the combined voting power in shares of Zoetis Common Stock other than with respect to the election of directors and approximately 97.6% ofthe combined voting power of Zoetis Common Stock with respyct to the election of directors. B. Purpose ofthe Exchange Offer The purpose of the Exchange Offer is to separate Zoetis' s animal health business from Pfizer's biopharmaceutical businesses in a tax-efficient manner, thereby enhancing stockholder value and better positioning Pfizer to focus on its core biopharmaceutical business. In addition, the Exchange Offer is expected to be tax-free to Pfizer stockholders and Pfizer. Finally, the Exchange Offer is an efficient means of placing Zoetis Common Stock with holders ofPfizer Common Stock who wish to own an interest in Zoetis. By comparison, a separation effected exclusively by a spin-off dividend of Pfizer's remaining
interest in Zoetis would result in all Pfizer stockholders becoming owners of Zoetis, regardless of their desire to own shares of Zoetis Common Stock.

May 21,2013
C. Terms ofthe Exchange Offer
The terms ofthe Exchange Offer will be fully described in the Prospectus ("Prospectus") included in a Registration Statement on Form S-4 to be filed by Zoetis. Participation in the Exchange Offer is voluntary, and it is expected that Pfizer, Zoetis and the dealer managers have not and will not make any recommendation about whether holders of Pfizer Common Stock should participate. The Exchange Offer will not set forth a fixed exchange ratio at the outset of the Exchange Offer. Rather, the Exchange Offer price will be expressed as a ratio of Zoetis Common Stock for each $1.00 of Pfizer Common Stock tendered pursuant to the Exchange OtTer (subject to the upper limit on the exchange ratio described below). This value relationship will reflect a discount to the estimated value ofZoetis Common Stock in order to encourage participation in the Exchange Offer. This pricing mechanism is similar to the one used in a number of transactions that received relief from the Staff. 4 We are separately seeking relief from the Staff ofthe Office ofMergers and Acquisitions in the Commission's Division of Corporation Finance to use this pricing mechanism in the Exchange Offer. D. The Steps ofthe Exchange Offer In addition to being described in the Prospectus, the Exchange Offer also will be described in the Schedule TO (the "Schedule TO") to be filed by Pfizer. Set forth below is a description ofthe key components ofthe Exchange Offer.

1. Conversion ofZoetis Class B Common Stock
   Immediately prior to the completion ofthe Exchange Offer, Pfizer will convert Zoetis Class B Common Stock into Zoetis Class A Common Stock to the extent necessary to effect the Exchange Offer.
2. The Distribution
   Following the conversion described above, Pfizer will distribute shares of Zoetis Common Stock to Pfizer stockholders pursuant to the Exchange Offer. In the Exchange Offer, Pfizer is offering holders of Pfizer Common Stock the opportunity to exchange all or a portion of their Pfizer Common Stock for shares ofZoetis Common Stock. See Bristol-Myers Squibb Company (avail. Nov. 16, 2009) and P&G (avail. Oct. 8, 2008). See also Kraft Foods Inc. (avail. July 1, 2008); Halliburton Company (avail. Mar. 21, 2007); Weyerhaeuser Company (avail. Feb. 23, 2007); McDonald's Corporation (avail. Sept. 27, 2006); PPG Industries, Inc. (avail. Dec. 21, 2012); and Kraft Foods Inc. (avail. July 1, 2008); Lazard Freres & Co. (avail. Aug. 11, 1995); TXU Corporation (avail. Sept. 13, 2004). 4

May 21,2013
II. DISCUSSION
As you are aware, Section 306(a) ofSarbanes-Oxley and Rule 101(a) of Regulation BTR generally prohibit a director or an executive officer of an issuer of an equity security from, directly or indirectly, purchasing, selling or otherwise acquiring or transferring any equity security ofthe issuer during any blackout period with respect to such equity security, if such equity security was acquired in connection with his or her service or employment as a director or an executive officer. Rule 1 OO(b) defines a "blackout period" with respect to the equity securities of an issuer (other than a foreign private issuer) as "any period of more than three consecutive business days during which the ability to purchase, sell or otherwise acquire or transfer an interest in any equity security of such issuer held in an individual account plan is temporarily suspended by the issuer or by a fiduciary ofthe plan" with respect to 50% or more of the participants or beneficiaries located in the United States under all individual account plans maintained by the issuer that permit participants or beneficiaries to hold or acquire equity securities ofthe issuer. Rule 102 of Regulation BTR provides a list of certain trading suspensions that do not constitute a blackout period as defined in Rule 1 OO(b).5 Pfizer has consulted with the third-party record keepers and custodians (the "Third-Party Administrators") ofthe Pfizer individual account plans (the "Plans") and, based on these consultations, Pfizer believes it is possible that the end ofthe Exchange Offer period may coincide with a blackout period as defined by Rule 100(b). The Third-Party Administrators have indicated to Pfizer that they temporarily will suspend the ability of participants and beneficiaries who give instructions to tender their shares of Pfizer Common Stock in the Exchange Offer to purchase, sell or otherwise acquire or transfer shares ofPfizer Common Stock held for their account under the Plans, including intra-plan transactions (such temporary suspension, the "Suspension"). Participants in and beneficiaries ofthe Plans who do not tender their shares of Pfizer Common Stock in the Exchange Offer will not be subject to the Suspension. The Suspension is expected to last more than three consecutive business days, commence prior to expiration ofthe Exchange Offer and extend past the time when Pfizer accepts tendered shares of Pfizer Common Stock in exchange for Zoetis Common Stock. The purpose ofthe Suspension imposed by the Third-Party Administrators is to enable the Third-Party Administrators to allow participants and beneficiaries ofthe Plans to elect to participate in the Exchange Offer while maintaining an accurate accounting of the account balances of such participants and beneficiaries.6 17 C.F.R. §245.102. It is our understanding that the Third-Party Administrators are permitted to commence the Suspension prior to the end ofthe Exchange Offer period. The relationship between the Third-Party
Administrators and the plan participants and beneficiaries is private, exists independently from the tender offer and is governed by terms and conditions outside ofthe Tender Offer. Notwithstanding the timing ofthe commencement ofthe Suspension, the Exchange Offer, by its terms, will remain open for a minimum of20 business days as required by Rule 14e￾1(a) of the Exchange Act. 6

May 21,2013
The Suspension will be a blackout period as defined by Rule 1 OO(b) only if 50% or more ofthe participants or beneficiaries located in the United States under all individual account plans maintained by the issuer that permit participants or beneficiaries to hold or acquire equity securities ofthe issuer tender their shares ofPfizer Common Stock in the Exchange Offer. Pfizer cannot at this time determine whether the Suspension will constitute a blackout period as defined by Rule 1 OO(b), and Pfizer may not be able to make such determination prior to the date ofthe Suspension. Pfizer will timely notify the Commission and each Pfizer director and executive officer ofthe potential blackout period as required by Rule 104 ofRegulation BTR. 7 Rule 101 (c) of Regulation BTR provides 1ecific exemptions from the statutory trading prohibition of Section 306(a)(l) and Rule lOl(a). Rule 101(c)(9) provides an exemption for "any acquisition or disposition of equity securities in connection with a merger, acquisition, divestiture or similar transaction occurring by operation oflaw." We believe that tender offers that are subject to Rule 13e-4 or Regulation 14D under the Exchange Act and Regulation 14E under the Exchange Act, such as the Exchange Offer, should be deemed to qualify for the exemption under Rule 101( c )(9). As a result ofthe application of Rule 13e-4 and Regulation 14E, the Exchange Offer will be conducted in accordance with laws adopted by the United States Congress and rules and regulations promulgated by the Commission pursuant to those laws. For instance, the Exchange Offer will be, among other things, required to be open to all holders of Pfizer Common Stock and the consideration paid to any holder ofPfizer Common Stock for shares tendered into the Exchange Offer must be the highest consideration paid to any other holder of Pfizer Common Stock for shares tendered in the Exchange Offer. 9 Indeed, absent the view that the Exchange Offer qualifies for the exemption in Rule 101(c)(9), Pfizer may be compelled to participate in a violation ofRegulation BTR by allowing directors and executive officers of Pfizer to tender their shares of Pfizer Common Stock in the Exchange Offer to avoid violating Rule 13e-4(f)(8)(i) ofthe Exchange Act, the regulatory provision that requires a tender offer to be open to all security holders ofthe class of subject securities. By tendering, the directors and executive officers would potentially be acting in contravention of Section 306(a)(4) and Rule lOl(a) because the tender could constitute a prohibited sale. We do not believe sales of Pfizer Common Stock by Pfizer directors or executive officers pursuant to the Exchange Offer during any potential blackout period are the types of sales that
Section 3 06( a)( 1) and Regulation B TR were intended to capture. 10 The Commission noted when
17 C.F.R. §245.104.
17 C.F.R. §245.10l(c).
See 17 C.F.R. 240.13e-4(f)(8).
We note that the Rule I01 ( c )(9) exemption will not allow directors and executive officers ofPfizer to sell, transfer or purchase any equity security ofPfizer outside ofthe Exchange Offer during any blackout period, if such equity security was acquired in connection with service or employment as a director or an executive officer. 10

May 21,2013 adopting Regulation BTR that the new rules would "equalizes the treatment of corporate executives and rank-and-file employees," guard against a "director or executive officer obtain[ing] an unfair advantage" and "align the interests of directors and executive officers more closely with those ofthe rank-and-file employees." 11 Transactions conducted pursuant to the Commission's tender offer rules and regulations, like the Exchange Offer, provide these protections. All Pfizer directors, executive officers and employees who own Pfizer Common Stock (including Pfizer Common Stock held for their account under the Plans) are eligible to participate in the Exchange Offer and will be treated equally under the terms ofthe Exchange Offer. Pfizer directors and executive officers that are allowed to tender Pfizer shares into the Exchange Offer will not have an unfair advantage over other Pfizer employees. Instead, allowing all holders of Pfizer Common Stock to choose whether they would like to participate in the Exchange Offer, without the potential to violate Section 306(a) and Regulation BTR, will uphold the investor protections against discriminatory tender offers open to only certain security holders that the Commission cited as a basis for adopting the tender offer all holders rule. 12 11 SEC Rel. No. 34-47225 (Jan. 22, 2003). 12 SEC Rel. No. 34-23421 (July 11, 1986).

May 21,2013

III. REQUESTED INTERPRETATIVE RELIEF
Based on the foregoing, we respectfully request that the Staff not object to Pfizer's interpretation that the disposition of equity securities in connection with the Exchange Offer qualifies for the Rule 101 ( c )(9) exemption and, as a result, that shares tendered under the Exchange Offer by Pfizer directors and executive officers will not be subject to the restrictions under Section 306(a)(1) ofSarbanes-Oxley or Regulation BTR.

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If you have any questions or comments with respect to this matter, please call me at (202) 371-7180. Very truly yours, ~~ Brian V. cc: Bryan Supran, Senior Vice President and Associate General Counsel, Pfizer Inc. Andrew J. Muratore, Assistant General Counsel- Business Transactions, Pfizer Inc. Thomas W. Greenberg, Skadden, Arps, Slate, Meagher & Flom LLP