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Ahead of the Bell: Bristol-Myers splits with Mead

Bristol-Myers Squibb Co. shares will offer greater risks and rewards after the company completes its split from Mead Johnson Nutrition Co., a Credit Suisse analyst said Monday.
/ Source: The Associated Press

Bristol-Myers Squibb Co. shares will offer greater risks and rewards after the company completes its split from Mead Johnson Nutrition Co., a Credit Suisse analyst said Monday.

The splitoff "removes Bristol-Myers Squibb's last source of earnings diversification," said analyst Catherine Arnold. The move is intended to help Bristol-Myers focus on buying and developing biotech drugs. Arnold said she expects the company's shares to trade lower on Monday.

On Sunday, Bristol-Myers said it will split off its 83 percent stake in Mead Johnson, the maker of children's nutritional products like Enfamil baby formula. Bristol-Myers shareholders will be able to swap their shares in exchange for a discount price on Mead Johnson shares.

Arnold believes the deal will boost the New York drugmaker's profit by cents per share in 2010.

Another Credit Suisse analyst, Robert Moskow, said Mead Johnson shares could fall 10 to 15 percent Monday because of the discount price, and because the split suggests Bristol-Myers was unable to sell Mead Johnson for as much as it wanted. He put that price at $60 per share.

In premarket trading, Bristol-Myers Squibb shares rose 2.7 percent, or 63 cents, to $23.80 from Friday's closing price of $23.18.