Applera Corporation had an SEC Filing today saying its Board of Directors has authorized management to pursue a possible separation of the Celera Group (NYSE:CRA) from Applera. The completion of this proposal is subject to conditions such as final Board approval, SEC clearance of the registration, receipt of an opinion of a tax-free status, and more. One interesting issue here is that approval by Applera stockholders is not required.

This separation would be via a one-for-one redemption of the Applera Corporation-Celera Group tracking stock for new Celera Corporation shares.  These will still keep the "CRA" ticker, but it would be a NASDAQ-listed stock.  At Celera’s request, Applera Corporation-Celera Group tracking stock would be de-listed from The New York Stock Exchange.   So it appears that Celera Corporation would become a separate, publicly-traded company, rather than a subsidiary or tracking stock as it is currently.

Kathy Ordonez, currently President of Applera Corporation-Celera Group, is expected to serve as the CEO of Celera, and the company headquarters will be located in Alameda, California.

Applera Corporation-Applied Biosystems Group (NYSE:ABI) common stock would continue to be traded on the New York Stock Exchange.

There is one potential warning flag that investors should look at closdely here.  On "OUR HISTORY" on the website, the company pans part of the business:

• While the Celera database business ultimately became profitable, it was clear by 2000 that this was not a sustaining business model, as the public effort caught up and provided free access to genome sequences.

Celera Genomics was formed in 1998 and in 1999 there was arecapitalization in a two-class stock issuance.  In early 2000, afollow-on offering of Applera Corporation-Celera Genomics stock raises$944 million.  Celera acquired Axys Pharmaceuticals in 2001 for itssmall molecule drug discovery.

These complex structures do not do any justice for shareholders.Companies either need to act like conglomerates or they need to befocused on core operations.  These tracking stocks ultimately don’twork.  The intent of tracking stocks is good for "unlocking shareholdervalue" while allowing the parent company to maintain control.Unfortunately, the road to hell is paved with good intentions.

For better or worse, this separation looks like it will make it more easy to understand what each company actually does.  We’ll be looking into this further for our Special Situation Newsletter, but we’ll hold off on making a decision on this one until we see the formal plans.

Jon C. Ogg
February 29, 2008

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