No Silver Lining From Sterling Drug

In its recent divestiture spree, Eastman Kodak has been getting surprisingly high prices for pieces of the Sterling Drug operation it acquired in 1988. Indeed, Kodak seems certain to bank far more than the $5.1 billion it paid for the health-care concern. But is that enough to transform the much-derided Sterling deal into a winner? Probably not. So far, Kodak has reaped about $4.6 billion for two former Sterling units (the clinical-diagnostics operation, sold on Sept. 6 to Johnson & Johnson, wasn't part of Sterling). Analysts estimate Kodak will get $1.9 billion more for the two parts of household-products maker Lehn & Fink, plus perhaps $300 million for Sterling's R&D building. That totals $6.8 billion. But Sterling's profits didn't cover costs of servicing an extra $5 billion in debt over six years, says Prudential Securities analyst Alex Henderson. His conclusion: Kodak "would have done better putting the money into T-bills."