Drug maker Bristol-Myers Squibb Co. (BMY) said Sunday it will split off its 83.1% holdings in Enfamil baby formula maker Mead Johnson Nutrition Co. (MJN) as a final step towards spinning it off into a fully independent BioPharma company. Bristol-Myers now intends to focus on its core BioPharma business following the split-off. The split-off is also expected to be net cash flow positive to the BioPharma business and accretive to earnings per share beginning in 2010.
In a statement, chairman and chief executive officer of Bristol-Myers Squibb, James Cornelius said, "This marks the latest step in our company's transformation into a BioPharma leader. By executing our healthcare divestment strategy, we have sharpened our BioPharma focus, improved the overall financial strength of the company and supported our ability to pursue strategic business development opportunities. All of these actions help us fulfill our mission to discover, develop and deliver innovative medicines to help patients prevail over serious diseases."
Under the proposed offer, Bristol-Myers shareholders can exchange some, none or all of their shares of Bristol-Myers common stock for shares of Mead Johnson common stock tax-free and at a discount. Following the completion of the offer, Bristol-Myers would have disposed of its entire ownership interest in Mead Johnson through the exchange offer.
Subject to the upper limit of 0.6027 shares of Mead Johnson common stock per share of Bristol-Myers Squibb common stock, for each $1.00 of Bristol-Myers Squibb common stock accepted in the exchange offer, the tendering shareholder would receive about $1.11 of Mead Johnson common stock. The exchange offer will expire on December 14, unless extended or terminated. Bristol-Myers Squibb owns 170 million shares or 83.1% of Mead Johnson.
The Mead Johnson split-off decision reflects the confidence Bristol-Myers has in the success of Mead Johnson's growth strategy and its strong financial performance since the initial public offer or IPO in February. Mead Johnson said it expects to incur costs incremental to its previous expectations for specified items in the fourth quarter of 2009 estimated in the range of $0.08 to $0.13 per share.
The completion of the exchange offer is subject to certain conditions, including that at least 144.5 million shares of Mead Johnson common stock will be distributed in the exchange. Mead Johnson would subsequently spin-off of any shares it still owns after the exchange offer is complete.
Citigroup Global Markets Inc., Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated will serve as the dealer managers for the exchange offer.
Evansville, Indiana-based Mead Johnson is a subsidiary of New York-based Bristol-Myers Squibb, that went public in February 2009, raising nearly $800 million through an IPO of 30 million of Class A common stock.
BMY closed Friday's regular trading session at $23.18, up $0.06 or 0.26% on a volume of 9.67 million shares, lower than the three-month average volume of 10.27 million shares, and MJN closed at $45.25, up $0.14 or 0.31% on a volume of 0.53 million shares, lower than the three-month average volume of 0.66 million shares.
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