ImClone Systems Inc. (NASDAQ: IMCL) is among the biotech bonanza merger candidates with one deal on the table and perhaps an unofficial deal waiting in the wings.  Bristol-Myers Squibb Co. (NYSE: BMY) has now increased its offer to $62.00 from $60.00 for the remainder of shares it does not already own.  A new letter from Bristol-Myers to Carl Icahn signals the company is also going directly to holders to remove existing board members and replace the board of directors with its own team in a secondary merger offer.

ImClone shares are up $3.10 at $62.50 in late morningtrading.  This still might not be enough to secure a deal, at least if Carl Icahn gets his way.  Using a tender directly toshareholders allows them to begin the immediate sale and realizationof profits.  But it also is below the current share price after the pop from last night’s news.  Thatputs the stock market odds at about 90% that an even higher deal will come or thatCarl Icahn will win his defense of the company for an even higher value.

Icahn has already signaled that he has a higher tentative bid in thewings, but this will also run the risk of keeping the deal lingering through next year.Depending upon what price shareholders are in ImClone, they mightactually do better by taking the money now rather thanwaiting for a $70.00 bid.  The reason is simple: 15% capitalgains tax rates in 2008 may be much higher in 2009.  That is mostlydependent upon the outcome of the Presidential election, but the 1993 precedent wasset showing that taxes can be retroactive during the same year.

Sometimes a bird in the hand is worth more than two in the bush.  CarlIcahn is no newbie to proxy fights.  But it is very possible that he istaking too aggressive of a stance here.  If that higher bid doesn’t materialize, then he’s taking on added risks for holders.  It seems hislatest efforts have yielded more losses than before after the stumblesat Yahoo! and Motorola.  Sometimes the desire to win and the cost ofthe battle exceed the war chest winnings.  Whether or not that is thecase will be known soon enough.

ImClone did get as high as $68.89 after Icahn revealed a higher possible bid was waiting in the wings.  Some third market trades in the after-hours and pre-market hours were right around $70.00.  But shares quickly sold off because of the tentative nature of things involving tentative higher bids and the risks that can prevail in fluid situations.  Shares have also closed under $60.00 in each of the last four days.  While a higher bid is being bet on, it would seem as of today that Carl Icahn may have a real fight on his hands.

Jon C. Ogg
September 23, 2008

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