Capital Markets

Rumors of IPO Extinction Prove False

Baby-formula maker Mead Johnson, a spinoff from Bristol-Myers Squib, is the first offering in three months.
Stephen TaubFebruary 11, 2009

Almost six full weeks into the new year, the first initial public offering of 2009 in the United States finally was priced on Tuesday evening.

The issuer, Mead Johnson Nutrition Co., set its shares at $24. The offering was increased to 30 million shares from the originally planned 25 million shares, putting its gross value at $720 million.

The underwriters, led by Citigroup and Morgan Stanley, have a 30-day option to purchase up to an additional 4.5 million shares to cover over-allotments, if any.

Mead Johnson said the net proceeds of about $680 million would be used to repay intercompany obligations.

The deal is significant for a number of reasons. Not only is it the first IPO of 2009, it is the first one in three months. In addition, it was priced on a day the overall stock market careened downward by more than 4 percent. What’s more, Mead Johnson, which makes children’s nutrition products, fetched a price within its expected range of $21 to $24. Market watchers are hoping the deal will help reopen the IPO market.

Most experts believe Mead Johnson, which was carved out of Bristol-Myers Squibb Co., is the ideal company to go public in a lousy environment. It is well known for its baby-formula product, Enfamil. It reported $2.1 billion in revenues in the first nine months of 2008, up 14 percent. It also has the backing of a huge drug company.

Now all eyes are on two other companies that were planning to go public this week. O’Gara Group, which makes transparent armor, night-vision equipment, and other products used by the military, hopes to raise as much as $152 million. And Changing World Technologies, a maker of renewable diesel fuel and organic fertilizers, looks to raise between $31 million and $42 million.

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