Bristol-Myers Squibb has announced plans to split off its stake in Mead Johnson Nutrition Co in a deal valued at $7.69 billion.
The New York-based company, owns 83.1% of Mead Johnson (and 97.5% of the voting interest), following an initial public offering of the unit in February which raised $720 million in gross proceeds. The split-off now permits B-MS investors to exchange their shares for Mead Johnson common stock.
Under terms of the offer, for each $1.00 of B-MS stock accepted in the exchange offer, the tendering shareholder will receive about $1.11 of Mead Johnson common stock. The company expects the split-off to be “a tax-advantaged way to further deliver value to B-MS shareholders” and be net cash flow positive to its existing biopharma business and accretive to earnings per share beginning in 2010.
Based on the 170 million shares of Mead Johnson owned by B-MS, and the unit’s closing stock price on last Friday of $45.25, the stake is worth some $7.69 billion. However, the proceeds depends on how many shares are tendered.
B-MS chief executive James Cornelius said that “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”. He added that “now is the right time to move forward with a split-off given the excellent performance of Mead Johnson since the IPO earlier this year and our confidence in the current and future performance of our biopharmaceuticals business”.
He concluded by saying that “with a successful execution of this split-off, we fully consider ourselves a biopharma company”. Mead Johnson is best-known for its infant formula Enfamil.
