Bristol-Myers capable of topping $70 per share mystery bid for ImClone, says ICAP's Sachin Shah

By Paul A. Harris

St. Louis, Sept. 10 - ImClone Systems Inc. board chairman, the corporate raider Carl Icahn, told Bristol-Myers Squibb Co. on Wednesday that its $60 per share cash bid for ImClone is inadequate.

However Icahn proceeded to say that this malady has a cure.

In a Wednesday press release Icahn mentioned several conversations with "the CEO of a large pharmaceutical company," the identity of which was not divulged. However this unnamed pharmaceutical company, according to Icahn, has submitted a $70 cash bid for ImClone, subject to due diligence, but not subject to financing.

ImClone's special committee, which spurned the Bristol-Myers bid, agreed to allow the unnamed company to conduct due diligence for two weeks, however the committee has made no determination as to whether this stealthy $70 per share would be adequate.

Higher dosage

It is very logical that another big pharmaceutical company is interested in ImClone, Sachin Shah, special situations analyst for ICAP Securities, commented in a Wednesday email message to Prospect News.

However ultimately Shah believes that Bristol-Myers is capable of coughing up a higher bid than the $70 offer from the company that chairman Icahn declined to name.

"The unnamed suitor could be Merck KGaA because they are the other company, aside from Bristol-Myers, that co-promotes, markets and sells Erbitux," the analyst said, referring to the blockbuster cancer drug that was discovered by ImClone.

Shah added that Icahn's "large pharmaceutical company" could also be Pfizer Inc., or a European peer.

"If this $70 per share offer sticks, then Bristol-Myers is capable of making a higher offer due to their cash position, as well as their dependence on new products for growth, and their existing business relationship with ImClone," Shah wrote.

"Although, they would welcome an additional cash infusion to make strategic acquisitions, Bristol-Myers shouldn't let ImClone get away," the special situations analyst added.

"Also, excluding the current illiquidity in ImClone's securities, it has approximately $5 per share in net cash.

"In the end, one way or another it seems that Icahn probably wants to resolve the possible sale of ImClone soon."

In Wednesday trading, shares of ImClone (Nasdaq: IMCL) gained 6.74%, or $4.29, to close at $67.94, less than 3% below the $70 mystery bid that Icahn announced.

Meanwhile shares of Bristol-Myers Squibb (NYSE: BMY) dropped by 1.68%, or $0.37 per share, to close at $21.67.

Shares of Merck (FRA: MRK.XE) were essentially flat, up 0.08%, or €0.06 to close at €77.56.

Pfizer (NYSE: PFE) fell by 0.22%, or $0.04, to close at $18.20.

Just a chaw

With big tobacco being a favorite target of state and federal politicians, Prospect News quizzed market sources as to whether government regulators could be expected to redouble efforts to stub out Marlboro cigarette-maker Altria Group, Inc.'s $69.50 per share bid to acquire chewing tobacco-maker UST Inc.

As a backdrop, in recent weeks the U.S. House of representatives approved landmark legislation granting the Food and Drug Administration power to regulate tobacco products.

Although the Bush administration has come out against the bill, which is now stalled in the Senate, if the DeWine-Kennedy Family Smoking Prevention and Tobacco Control Act passes it would grant states wide powers to regulate and even outlaw the use of tobacco products.

A special situations equities analyst told Prospect News on Wednesday that while it would not be prudent to discount the possibility that the government would mount above average resistance to the Altria-UST merger, the mitigating fact may be that UST, maker of Skoal chewing tobacco, literally does not create any more smoke.

"If Altria were acquiring another cigarette-maker, it could definitely be a problem," the analyst said.

Since both major presidential candidates have been reported to be in favor of the DeWine-Kennedy legislation, Prospect News asked sources whether it might make a difference which candidate, Republican John McCain or Democrat Barak Obama, emerges victorious in the November presidential elections.

A stock analyst who covers tobacco said likely not.

"Although anything is possible, the deal is being reviewed prior to the change, and even with the election it's not certain that there will be change in the [Federal Trade Commission] positions," the analyst said.

"If this was announced a year from now, and we had a different government, it could be different.

"But with the deal announced at this time the election will likely not be a factor."

Meanwhile the special situations equities analyst said that those rooting for the deal would almost certainly be of the belief that regulatory impact, should it surface, would materialize in a comparatively subdued form should McCain, the Republican candidate, prevail.

However this source also believes that barring the unforeseen the merger should clear its regulatory hurdles before any changes in the makeup of the FTC, due to the outcome of the election, take place.

In Wednesday trading UST (NYSE) shares underperformed the market, down a dime, or 0.15%, to close at $68.60, less than 1.3% below the $69.50 bid.

Meanwhile Altria (NYSE: MO) shares gained a dime, or 0.48%, to close at $20.76.

Wednesday's situations unfolded as the major U.S. stock indexes regained some of the ground that they gave up on Tuesday.

The Nasdaq posted the biggest percentage gain, 0.85%, and was up 18.89 points on the day to close at 2,228.70.

The S&P 500 ended the day 0.61% higher at 1,232.04, up 7.53 points.

The Dow Jones Industrial Average gained 0.34%, or 38.19 points, finishing the Wednesday session at 11,268.92.

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