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More of a Biopharmaceutical Pure Play

The move frees up the company to focus on its core franchise, and I view this as very good news.
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Bristol Myers (BMY) announced that it plans to split off the remaining 83.1% interest it has in Mead Johnson (MJN) , something I highlighted as a possibility in my September 30 alert and view as good news for the shares today. With this announcement, the company becomes more of a biopharmaceutical pure-play company, in line with management's stated strategy.

Through an exchange offer, BMY shareholders can exchange BMY stock for MJN at a 10% discount. The exchange ratio is subject to an upper limit of 0.6027 MJN/BMY share based on prices taken on December 8-10 (for example, if done at Friday's closing prices (BMY at $23.18 and MJN at $45.25), the exchange offer would be 0.5686). The deal is tax free to shareholders, net cash positive to the company and accretive by around 10 cents to 2010 earnings.

Most importantly, this frees up the company to focus on its core biopharmaceutical franchise and its "String of Pearls" strategy to buy small/medium-sized companies with a focus on growing its strong pipeline. It has $10 billion of cash on its balance sheet currently (50% in the US/50% offshore), which gives it ample flexibility to grow internally, externally and to focus on its dividend. I view this as very good news overall and it remains a core position in the fund.

Regards,

Jim Cramer

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DISCLOSURE: At the time of publication, Cramer was long BMY.