Bristol-Myers bids for ImClone; Marathon to split; Yahoo! shareholders to meet

By Aaron Hochman-Zimmerman

New York, July 31 - Bristol-Myers Squibb Co. turned heads of analysts with a big offer of $4.5 billion for its cancer-fighting sidekick ImClone Systems Inc. on Thursday.

Meanwhile, rather than combine, Marathon Oil Corp. was considering splitting its company into two halves.

If the proposal is approved, one of the new companies would explore and develop oil, the other would refine and transport what the first produces.

Also, investors looked ahead to the once critically important Yahoo! Inc. shareholder meeting which is expected to be anti-climatic in the wake of the deal to settle Carl Icahn's proxy fight.

In the broader market, the Dow Jones Industrial Average was slammed for 205.67, or 1.78%, to end at 11,378.02, while the Nasdaq Composite Index gave up just 4.17, or 0.18%, to finish at 2,325.55.

The S&P 500 sank 16.88, or 1.31%, to close at 1,267.38.

High drug prices

Bristol-Myers Squibb jumped into deal-land on Thursday with a $60 per share or $4.5 billion offer for the remainder of ImClone.

The offer for the 83% of ImClone it does not own represents a 30% premium to ImClone's close on Wednesday afternoon.

Unless Bristol-Myers Squibb knows something that nobody else knows, "it's pretty expensive," said Natixis Bleichroeder analyst Jon Lecroy.

Still, "our proposed acquisition of ImClone represents an evolutionary development in our companies' seven-year-long relationship, and is in the best interests of Bristol-Myers Squibb and ImClone shareholders and employees, and the patients we serve together," according to a statement from James Cornelius, chairman and chief executive officer of Bristol-Myers Squibb.

"I think it's a great deal for ImClone and less of a great deal for Bristol-Myers," Lecroy said, but added that the majority of the doubters are third parties.

"Most of the shareholders I spoke with think it's a good idea," he said.

However, those shareholders do not include the so far silent chairman of ImClone, Carl Icahn.

Icahn pushing for a higher price could be one of the few things to change this deal, Lecroy said, and Icahn has yet to weigh in.

Also, anti-trust issues are a nearly nonexistent as Bristol-Myers Squibb "already gets the lion's share of Erbitux," ImClone's successful cancer fighting drug.

Bristol-Myers has been in the midst of a large shifting of assets, Lecroy said and may be trying to make money in the wrong way.

"They sold their ConvaTec business and that's the money they're using" to buy ImClone," he said.

However, by Lecroy's calculation, the wound therapeutics and ostomy care products maker ConvaTec adds three times the earnings ImClone will.

The numbers did not seem to make sense unless Erbitux grows at a much faster rate then most people expect, Leroy said.

Shares of Bristol-Myers Squibb (NYSE: BMY) fell by $0.39, or 1.81%, to end the session at $21.12.

Shares of ImClone (Nasdaq: IMCL) launched up by $17.49, or 37.66%, to close the day at $63.93.

Half Marathon?

Marathon Oil announced that it may divide its company into "two strong independent publicly traded companies," a press release said on Tuesday.

The upstream half would concentrate on exploration and production and the other downstream entity would focus on refining and transportation, the release said.

"The biggest motivation is to unlock some value on their upstream side," said analyst Jim Byrne of BMO Capital Markets.

"The equity has been underperforming in the downstream sector," he said, while "the upstream is as good as anybody else's."

Cutting loose the dead weight obviously favors the upstream side, but the question remains over what will happen to the downstream side left on its own.

"It'll be interesting," Byrne said.

Across the entire sector, "independent refiners are trading near the bottom of their recent trough," he said and "they are going to stay quite weak."

Still, among the shareholders "the initial reaction has been positive," he said.

However, during Thursday's second quarter earnings call senior management "pretty much dodged all the questions" about the proposed division, Byrne said and offered "no insight into what happens to the downstream guys on the conference call."

Shares of Marathon (NYSE: MRO) was better by $4.34, or 9.62%, to finish trading at $49.47.

Yang to face his Yahoos

With Yahoo!'s long anticipated and much discussed shareholder meeting on Friday, Yahoo! shares (Nasdaq: YHOO) traded lightly and ended lower by just $0.14, or 0.70%, at $19.89.

The deal with Icahn will keep Jerry Yang in place as chief executive officer, but many in the market believe the proceedings will leave Yang severely weakened.

Any Microsoft Corp. offer seems to have evaporated, at least for now, which the leaves plenty of questions for management which will now be joined by Icahn.

Investors which have consistently criticized the management of Yahoo!'s possible sale will have their chance to take aim at Yang and perhaps carve a new course for the once mighty internet force.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.