Originally published Saturday, September 17, 2011 at 10:01 PM

Sunday Buzz

How Zillow got its 'Z'; Physio-Control's uncertain future

Zillow, the Seattle-based online real-estate information company that went public on Nasdaq in July, accomplished something no other company has: It pried a single-letter ticker symbol (Z) out of the viselike grip of the New York Stock Exchange. Also, Medtronics' plans for Redmond-based device company Physio-Control aren't clear, but the cost is adding up.

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When Zillow, the Seattle-based online real-estate information company, went public on Nasdaq in July, it accomplished something no other company had been able to do: Pry a single-letter ticker symbol (Z, of course) out of the viselike grip of the New York Stock Exchange.

Now that Zillow's post-IPO quiet period has expired, the company and its advisers are able to discuss the investment-banking jujitsu they employed to win Zillow its coveted Z.

Single-letter tickers long were the exclusive province of the NYSE, doled out like gold stars to the mightiest of the nation's industrial-era giants: AT&T (T), U.S. Steel (X), Ford Motor (F), Kellogg (K), and so on.

More recently, several of the old single-letter companies (Sears, Gillette, Chrysler) have either gone bust or been merged beyond all recognition. Still, a single-letter ticker retains a certain cachet.

When Zillow decided to go public, says chief marketing officer Amy Bohutinsky, it wanted the Z symbol. (Trivia: Which stock had last used Z? Answer at end of column.)

"It was important because the letter Z is so closely related to our brand," Bohutinsky said. "Z is a letter that we have pivoted around from a marketing perspective since our launch — I've worked through a lot of Z words."

But Patrick Healy of Issuer Advisory Group, who was working on Zillow's behalf, says that when he broached the Z matter to the NYSE a few weeks before Zillow filed its preliminary prospectus, he was told that the exchange was reserving the letter for another company — generally assumed to be mobile-games maker Zynga — that was expected to roll out an IPO later in the year.

(This was not a new practice: For years, the NYSE held off issuing the "M" and "I" symbols, in case Microsoft and Intel could be persuaded to switch exchanges.)

But Healy had a couple of trumps to play. One was a 2007 rule change by the Securities and Exchange Commission that allowed companies to retain their tickers when they moved from one exchange to the other.

The other was the NYSE's plan to merge with the German stock-exchange operator Deutsche Borse. The proposed deal required SEC approval, and regulators would be especially sensitive to complaints about anti-competitive behavior.

Healy says he called "a person at a very high level" at the SEC, arguing that the NYSE was violating the spirit, if not the letter, of the 2007 rule by holding Z for a company that hadn't even filed to go public yet.

His message: "My client is being denied something they really want for a company that may never use it."

After getting assurances of support from the SEC official, Healy called back the NYSE, which by this time was defending its Deutsche Borse deal against an unwanted bid from Nasdaq. The exchange agreed to release the Z.

"The last thing they needed was more controversy, and we took full advantage of that," he says. "We give them full credit for not letting this thing escalate into a full-fledged fight."

As for the last company to use Z as its stock symbol: That was Woolworth, later known as Venator Group and still later as Foot Locker. Foot Locker finally gave up the letter in 2003 and now trades as FL.

— Drew DeSilver,

Future of Physio

remains unclear

It's been nearly eight months since Medtronic said it would divest Redmond-based Physio-Control, a cornerstone of this region's medical-device industry.

Since then the Minneapolis-based giant has been tight-lipped about when and how it plans to shed Physio, which now employs 750 here and 1,200 worldwide.

Whatever its plans, they aren't cheap. A recent regulatory filing disclosed Medtronic already has spent $5 million on "transaction costs associated with the potential divestiture" of Physio.

One possible reason: Physio's legacy of difficulties with the Food and Drug Administration. Medtronic's previous plans to spin off Physio as an independent public company, announced in late 2006, were canceled when the Redmond factory ran into quality-control problems a few months later.

It took three years to gain the agency's OK for full, unrestricted worldwide shipments of Physio's products, which include automated external defibrillators — the devices placed at airports, hotels and other public places to treat sudden cardiac arrest — as well as external defibrillators that are used by emergency responders such as ambulance drivers.

"Physio's recent history has been fairly troubled," says analyst Mike Roarke, who covers Medtronic for McAdams Wright Ragen in Seattle. So the big bucks could be going to ensure all potential regulatory and accounting issues are scrubbed clean, "to shore up any comfort issues that a buyer might have," he says.

But analyst Bruce Jackson, who follows Medtronic for Morgan Joseph TriArtisan in New York, says the cost isn't particularly surprising and doesn't point to any problems with the deal: "It takes a lot of work to sell a company."

Physio logged sales of $425 million in its latest fiscal year — a big number, but just 3 percent of Medtronic's total. Medtronic said in February that Physio's profit margins weren't competitive with its other units.

A spokesman for the parent company would only say that Physio-Control "is a profitable business entity on its own" and the divestiture is moving forward.

The alternative to an IPO or a direct spin-out to existing shareholders would be a sale, either to another device company or to private-equity investors.

Roarke says he's expecting a sale. Jackson also says Physio is likely to wind up with a strategic buyer — meaning a company whose existing business can be expanded with Physio's products and skills.

Founded in 1955 by University of Washington cardiac surgeon Dr. William Edmark, Physio was a public company from 1971 to 1980, when it was bought by Eli Lilly. Physio was then sold in 1994 to a private-equity firm, which took it public again a year later. Medtronic acquired it in 1998.

So whatever happens to Physio next, it probably won't be the first time.

— Rami Grunbaum

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