Remember the rumor that Bristol-Myers Squibb might sell off the 83 percent stake it still holds in nutritional subsidiary Mead Johnson? The talk was that Group Danone had hired investment bankers to work on a bid. Deal speculation ratcheted up Mead Johnson stock by 10 percent.
But as Bristol CEO Jim Cornelius pointed out during the company's earnings call yesterday, offloading that ownership stake would expose the company to a huge tax liability. So a traditional buyout isn't going to happen. Instead, the Wall Street Journal Health Blog reports, Bristol might pursue a tax-free kind of deal. A spinoff to existing Bristol shareholders, for instance. Or Bristol could just hang onto the company.
Meanwhile, Mead Johnson could deliver another sort of benefit to Bristol: When the company closes on some debt refinancing, the Health Blog reports, Bristol may get some $1.7 billion in cash. Added to the cash it already has in the bank, that's $3 billion. Not a bad war chest for small buyouts or licensing deals.
- read the Health Blog post