Bristol-Myers Squibb Co. (NYSE: BMY) is splitting off its holdings in infant formula maker Mead Johnson Nutrition Co. (NYSE: MJN) in order to focus on its biopharmaceutical business, according to Associated Press.
The New York-based drug maker, which owns about 83 percent of Mead stock, expects the deal to add to earnings starting in 2010.
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The company says the stock swap is designed to allow Bristol-Myers shareholders to exchange some, all or none of their shares for Mead stock tax-free and at a discount. For each $1 of Bristol-Myers stock swapped, shareholders will get about $1.11 worth of Mead shares.
Bristol-Myers in 2008 decided to spin off Mead Johnson to focus on buying biotech drugs and shift its efforts into biopharmaceuticals, part of a strategy the company calls "String of Pearls."
Illinois-based Mead, which makes children's liquid and powder formulas under the Enfamil, EnfaKid and Choco Milk brands, went public in February, raising $680 million after expenses. The company earned a profit of $335.6 million on revenue of $2.11 billion in the first nine months of the year. Both totals are down about 3 percent from last year.
Mead Johnson shares have rallied 89 percent since the company's initial public offering priced at $24 on Feb. 11. Bristol-Myers shares have edged up about 2 percent over the same period.
Bristol-Myers owns 170 million shares of Mead Johnson Class A and Class B common stock. Based on the $45.25 closing price of Mead shares on Friday, the value of the shares being split off would total $7.69 billion.
The exchange ratio will represent a 10 percent discount to the daily volume-weighted average price of the companies' shares over a three-day period currently expected to be Dec. 8-10. The deal is subject to at least 144.5 million Mead shares being distributed in exchange for Bristol-Myers stock, among other conditions.
The exchange offer will expire Dec. 14. Citigroup Global Markets Inc., Goldman, Sachs & Co. (NYSE: GS) and Morgan Stanley & Co. (NYSE: MS) will serve as the dealer managers for the exchange offer.
In afternoon trading, Bristol-Myers shares added $1.21, or 5.2 percent, to $24.40. Earlier they set a 22-month high of $24.60. Mead Johnson stock fell $1.68, or 3.6 percent, to $43.73.
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