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No Future Tax Shock for Bristol-Myers

Bristol-Myers Squibb should not suffer a tax hit for splitting off Mead-Johnson, even if the smaller company is scooped up within the two-year "prohibited" period. Here's why.

November 25, 2009

Pharmaceutical giant Bristol-Myers Squibb plans to "split off" its 97.5% interest in Mead-Johnson Nutrition Co., and according to a November 15 press statement, it's likely that the deal will constitute a stock-for-stock, tax-free transaction for Mead-Johnson shareholders. Indeed, despite the public ownership of Mead-Johnson stock, Bristol-Myers is "in control" (within the meaning of Section 368(c) of the Internal Revenue Code) of Mead-Johnson. That means, once its high-vote stock is converted into low-vote stock, Bristol-Myers will own about 83% of the total combined voting power of Mead-Johnson's outstanding stock. Read more...

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