Bristol-Myers Squibb Co. is splitting off its holdings in infant formula maker Mead Johnson Nutrition Co. in order to focus on its biopharmaceutical business.
The New York-based drug maker, which owns about 83 percent of Mead stock, expects the deal to add to earnings starting in 2010.
The company says the stock swap is designed to allow Bristol-Myers shareholders to exchange some, all or none of their shares for Mead stock tax-free and at a discount. For each $1 of Bristol-Myers stock swapped, shareholders will get about $1.11 worth of Mead shares.
Bristol-Myers in 2008 decided to spin off Mead Johnson to focus on buying biotech drugs and shift its efforts into biopharmaceuticals. Illinois-based Mead, which makes children's liquid and powder formulas under the Enfamil, EnfaKid and Choco Milk brands, went public in February, raising $680 million after expenses.
"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," said Bristol-Myers Chairman and CEO James M. Cornelius in a statement late Sunday. "With a successful execution of this split-off, we fully consider ourselves a BioPharma company."
Bristol-Myers owns 170 million shares of Mead Johnson Class A and Class B common stock. Based on the $45.25 closing price of Mead shares on Friday, the value of the shares being split off would total $7.69 billion.
The exchange ratio will represent a 10 percent discount to the daily volume-weighted average price of the companies' shares over a three-day period currently expected to be Dec. 8-10. The deal is subject to at least 144.5 million Mead shares being distributed in exchange for Bristol-Myers stock, among other conditions.
The exchange offer will expire Dec. 14. Citigroup Global Markets Inc., Goldman, Sachs & Co. and Morgan Stanley & Co. Inc. will serve as the dealer managers for the exchange offer.
"This transaction represents the important final step in our journey to be a fully independent public company," Mead Johnson CEO Stephen W. Golsby said in a statement.