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Bristol-Myers To IPO Baby Formula Biz

Posted: Feb 16, 2009 09:22 AM by Eric Fox

Tickers in this Article: BMY, MJN, OGAR, JNJ, AMGN

Despite the terrible investment climate for equities, Bristol-Myers Squibb (NYSE:BMY), along with a few other intrepid companies, is dipping its toes into the ice-cold waters of public share offerings. Results from these offerings may help determine if the equity markets have been permanently damaged by the carnage of the last couple of years.

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Baby Formula Bonanza
Bristol-Myers is doing a partial offering of its Mead Johnson Nutrition (NYSE:MJN) business. Mead Johnson currently falls into Bristol-Myers's nutritional segment. In fiscal 2008, its sales totaled $2.8 billion and made up approximately 14% of the company's total sales. Over the last year, Bristol-Myers has worked to extricate itself from its non-pharmaceutical businesses. In August 2008, it sold its Convatec division, which produces skin care and wound care products. Six months earlier, it sold its medical imaging business.

Mead Johnson's mainstay product is the Enfamil family of baby formula. In fiscal 2008, sales of Enfamil totaled $1.1 billion.

Following the offering, Bristol-Myers will retain approximately 85% of the company through ownership of the balance of the Class A shares; it will retain 100% of the Class B shares. This offering should be well-received, as the nutritional segment is considered to be fairly defensive. (To learn more about defensive industries, read Guard Your Portfolio With Defensive Stocks.)

2009's Other Intrepid Companies
Madison Square Capital, a real estate investment trust (REIT) formed to invest in mortgage or agency securities using leverage, originally filed to go public last spring. Given the market view of its business, Madison Square Capital's reasons for going public now are unclear.

O'Gara Group (Nasdaq:OGAR), which manufactures safety and security products for sale to governments and commercial customers, is taking the public offering plunge as well. One of its businesses aids auto manufacturers in creating armored vehicles. In a world of increasing threats, the company seems poised to do well. However, investors should beware that O'Gara Group is a fusion of three companies joined together for the IPO.

Medidata Solutions filed to go public in January. The company provides services and products that assist clinical laboratories in conducting medical research. Small, with less than $100 million in revenue last year, Medidata Solutions sells to a blue chip list of customers that includes Johnson & Johnson (NYSE:JNJ) and Amgen (Nasdaq:AMGN).

Bottom Line
In the coming weeks, several initial public offerings, the first of 2009, will roll out. The response by investors will provide a strong indication of the market's appetite for equities in the coming year. While some offerings seem well-positioned for a warm market reception, others remain questionable.

By Eric Fox

Eric J. Fox, is the founder of Brittain Capital Management, LLC., which manages the Alesia Fund, LP., a Value oriented long/short investment partnership. You can read more of his views on investments at his blog - Stock Market Prognosticator.

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