Quick close for Mead Johnson split; China key in 3Com deal; more buys predicted for Goldcorp

By Cristal Cody

Tupelo, Miss., Nov. 16 - Bristol-Myers Squibb Co. said Monday the company expects to complete the split-off of its 83.1% stake in baby formula maker Mead Johnson Nutrition Co. before the end of December.

Also on Monday, an analyst said that 3Com Corp.'s $2.7 billion buyout by Hewlett-Packard Co. should close despite any hard feelings from the Chinese over a failed 2007 attempt to merge 3Com with a private China business.

In other situations, Goldcorp Inc.'s C$238 million acquisition of Canplats Resources Corp. likely is not the last of impending deals for the Canadian miner, an analyst told Prospect News.

Meanwhile, Wall Street rallied on Monday.

The Dow Jones Industrial Average closed up 136.49 points, or 1.33%, at 10,406.96.

The Standard & Poor's 500 index climbed 15.82 points, or 1.45%, to 1,109.30, and the Nasdaq Composite index gained 29.97 points, or 1.38%, to 2,197.85.

Mead Johnson to go it alone

Shares of Mead Johnson lost $2.04, or 4.51%, to close Monday at $43.21.

Under the split-off terms, Bristol-Myers Squibb shareholders can exchange some, none or all of their shares for shares of Mead Johnson at a 10% discount. For each $1.00 of Bristol-Myers Squibb stock, shareholders will receive $1.11 in Mead Johnson stock.

The exchange offer will expire on Dec. 14, and the company expects to close the split-off by Dec. 15.

Stephen W. Golsby, Mead Johnson's chief executive officer, said in a statement that the decision to split off the Glenview, Ill.-based company "reflects confidence in the success of our growth strategy and our strong financial performance since our IPO in February."

Mead Johnson shares have nearly doubled since the company's initial public offering on Feb. 11, 2009 at a price of $24.00 a share.

James M. Cornelius, chairman and CEO of Bristol-Myers Squibb, said on a conference call with analysts on Monday that now is the best time for the split-off.

"In my own mind, I felt a transformational transaction like this was a year, 18 months away," he said.

But on Friday, Bristol-Myers Squibb had a positive preliminary operating plan and cash flow review with an estimated $10 billion in cash on the balance sheet. Then, "yesterday we had a board meeting," Cornelius said.

"Mead Johnson's stock has behaved like a rocket ship, so the stars are literally lined up to try this transaction before the Christmas holidays," he said. "We go into 2010 as a purely biopharma company."

After the split, New York-based Bristol-Myers Squibb will be a dedicated biopharmaceutical company with plans to launch five new products in the next two years.

Shares of Bristol-Myers Squibb rose to a new yearly high of $24.63 on Monday before the stock closed up $1.12, or 4.83%, at $24.30.

Investors fret over Chinese feelings

Palo Alto, Calif.-based computer maker Hewlett-Packard said earlier this month it will acquire 3Com for $7.90 a share in a deal to expand its Ethernet switches and network routers products and increase its presence in China, where half of 3Com's sales originate.

Marlborough, Mass.-based 3Com provides products that include routers, switches and security systems for network equipment.

The acquisition is expected to close in the first half of 2010, but the timing of Hewlett-Packard's buyout of 3Com deal is likely to be driven by Chinese regulatory approval, Krisztian Szentessy, an analyst with Pali Capital Inc., said in a research note on Monday.

"Our main concerns are the potentially long transaction timeframe and possible volatility for the gross deal spread around mid-February 2010 as the Chinese antitrust authority could well decide to refer the transaction to a phase 2 review," Szentessy said.

Some concerns stem from a failed attempt in 2007 for Bain Capital Inc. and private Chinese company Huawei Technologies to acquire 3Com. The deal was halted over opposition from U.S. congressional leaders.

The buyout also requires regulators' approval in the United States and European Union.

Szentessy said there appears to be some product overlap between the two companies related to Ethernet switches, but 3Com's "current share price implies an 88% probability" of the deal closing, potentially by early May.

"In our view, the deal is attractive as we believe that the probability of the deal breaking is less than 10%, given the high quality of the bidder, the relatively strong merger agreement and the manageable regulatory risk," Szentessy said.

Shares of 3Com fell 1 cent, or 0.13%, to close at $7.50 on Monday.

Hewlett-Packard's stock rose 90 cents, or 1.80%, to $50.81.

Goldcorp likely to mine new deals

Canplats Resources said Monday Goldcorp will pay 0.074 of a share for each share of Canplats for an implied value of C$3.42 per share.

Also, Canplats' shareholders will receive a 90.1% interest, at a value of 18 Canadian cents per share, in a new exploration company that will hold early-state exploration projects in Mexico.

Vancouver, B.C.-based Goldcorp has been buying up companies and operations around its Penasquito gold project in Mexico.

One analyst told Prospect News on Monday that the acquisition of Canplats, also based in Vancouver, is a good fit and Goldcorp probably will continue to hunt for acquisitions.

"It's certainly attractive because of where the property is," the analyst said. "It's close to Penasquito. I think they believe anything within a certain distance likely contains gold. That's why they want to pick up as much as they can, but this is not the only area they're expanding. I would expect them to keep looking."

The Canplats acquisition is expected to close in January. The deal must receive regulatory clearances and approval by Canplats' security holders.

Canplats has agreed to pay Goldcorp a C$7.2 million break-up fee if the deal does not close.

Shares of Canplats soared 96 Canadian cents, or 37.65%, to close Monday at C$3.51.

Goldcorp's U.S.-listed stock added 58 cents, or 1.32%, to finish at $44.65.

Mentioned in this article:

3Com Corp. Nasdaq: COMS

Bristol-Myers Squibb Co. NYSE: BMY

Canplats Resources Corp. TSX Venture: CPQ

Goldcorp Inc. NYSE: GG

Hewlett-Packard Co. NYSE: HPQ

Mead Johnson Nutrition Co. NYSE: MJN

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