Nov. 16 (Bloomberg) -- Bristol-Myers Squibb Co. said it will spin off its 83 percent stake in Mead Johnson Nutrition Co., the maker of the Enfamil infant formula, and increase its focus on developing new biotechnology medicines.

Bristol-Myers shareholders will receive $1.11 of Mead Johnson stock for each $1.00 tendered in Bristol-Myers shares, the New York-based drugmaker said in a statement yesterday. Mead Johnson shares have risen 89 percent in the nine months since the stock was first sold publicly in February.

Bristol-Myers Chief Executive Officer James M. Cornelius said last month he was considering either spinning off or seeking a buyer for Mead Johnson. Cornelius has been selling assets to raise money for purchases and cutting jobs to lower costs by $2.5 billion by 2012, when the blood-thinner Plavix faces generic competition. In July, the drugmaker bought Medarex Inc. to double its pipeline of biotechnology drugs.

Losing the nutritionals business helps the drugmaker “focus on branded pharmaceuticals,” said Les Funtleyder, a Miller Tabak & Co. analyst in New York, in a telephone interview yesterday. “To the extent that this moves them a little closer to that, this is a positive.”

Bristol will not get any proceeds from the cashless transaction, said spokesman Brian Henry in a statement. The deal will reduce the number of Bristol shares outstanding, thus increasing the amount of earnings per share in 2010, he said.

Cash-Flow Benefit

Bristol’s cash flow will also benefit from the deal because the company will retire 280 million of its own shares, on which it paid a $1.25 a share dividend for a total of $347 million. That gain will be offset by $100 million it will no longer receive from Mead Johnson’s dividend.

Along with formulas including Enfamil that generated 61 percent of the company’s 2008 revenue of $2.88 billion, Mead Johnson sells nutritional supplements for pregnant and nursing women, and people with metabolism maladies, according to U.S. regulatory filings.

Bristol-Myers owns 170 million shares of the nutrition business’s Class A and B stock, composing a 97.5 voting interest and an 83 percent economic interest, the drugmaker said. The offer expires at midnight in New York on Dec. 14, and is subject to some conditions, according to the statement. The transaction is expected to be tax-free, Bristol-Myers said.

In the deal, Bristol-Myers’s Mead Johnson Class B stock will be converted into Mead Johnson Class A stock.

‘Right Time’

“Now is the right time to move forward with a split-off, given the excellent performance of Mead Johnson since the IPO earlier this year and our confidence in the current and future performance of our biopharmaceuticals business,” Cornelius said in the statement.

Bristol-Myers on Oct. 22 raised its earnings forecast for the year after third-quarter profit rose 64 percent on lower costs and higher sales of Plavix and the mood stabilizer Abilify.

The Medarex acquisition, for about $2.4 billion, gave Bristol-Myers full ownership of the skin cancer drug ipilimumab, which it had been developing jointly with that company.

Ipilimumab, which targets metastatic melanoma, is in the final of three stages of testing typically required for U.S. Food and Drug Administration approval. The drug is also being studied in lung and prostate cancers. Additionally, Bristol- Myers gained rights to seven experimental antibodies owned by Medarex and stakes in three more drugs the company shares.

Cornelius told investors in July the company will continue to acquire products and companies, and while acquisitions of about $2 billion are “digestible,” the company “wouldn’t rule out” deals costing $4 billion to $6 billion.

Bristol-Myers also said it has postponed its Dec. 2 investor meeting until 2010 because it is limited in what it can say while the exchange offer is open.

Bristol-Myers rose 6 cents to $23.18 on Nov. 13 in New York Stock Exchange composite trading. Mead Johnson shares increased 14 cents to $45.25.

To contact the reporter on this story: Meg Tirrell in New York at mtirrell@bloomberg.net; Shannon Pettypiece at spettypiece@bloomberg.net.

Last Updated: November 16, 2009 00:00 EST