Bristol-Myers Plans Partial Spin-Off of Nutritional Unit in IPO (BMY)

Bristol-Myers Squibb Company (NYSE: BMY) came out with earnings at $0.35 EPS and reaffirmed 2008 guidance of $1.36 to $1.46 GAAP EPS and $1.60 to $1.70 non-GAAP EPS.  It also maintained a 2007 to 2010 CAGR of 15% for non-GAAP EPS.  While this looks like a miss on the surface with First Call at $0.41 EPS, we are most concerned with the company’s plan to partially spin-off one of its operations.

Bristol-Myers Squibb announced that it currently plans to file "by year-end" to sell approximately 10% and no more than 20% of its Mead Johnson Nutritionals unit to the public through an IPO.  BMY will retain at least an 80% equity interest in Mead Johnson Nutritionals for the foreseeable future.

After "extensively considering strategic options," BMY management said that it believes this will allow Mead Johnson Nutritionals to implement its growth plans, increase shareholder value, and maintain its financial contribution to Bristol-Myers Squibb.  Obviously, the execution of the partial spin-off is subject to many factors and uncertainties including business and market conditions. 

In short, this is the new version of the tracking stock.  So we wanted to see how the unit did and wanted to see how it compares to the full company.  Worldwide Nutritional sales increased 16% (after a 5% favorable forex) to $703 million in Q1-2008.  For a comparison on how this relates to entire BMY, the whole company generated $5.2 Billion in total sales. 

U.S. Nutritional sales rose 5% to $288 million in Q1-2008, primarily due to increased sales of ENFAMIL. Its international nutritional sales rose 25% to $415 million (including 10% positive forex effect) in Q1-2008 due to growth in both infant formulas and children’s nutritionals.

Bristol-Myers Squibb Co. has a $42 Billion market cap as of yesterday’s close.

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Jon C. Ogg
April 24, 2008