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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: jeffbas who wrote (12527)	5/25/2001 1:23:27 PM
From: Paul Senior	Read Replies (2) \| Respond to of 78744

Jeffrey, you're reaction to the WSJ BMY article is reasonable, but for BMY followers, that sale has been long awaited. BMY's beauty-care operations which include the hair-care line accounted for just 12% of BMY's sales and 5% of pretax earnings (in '99, from the '00 Barron's report I am re-reading now). In skimming the '00 BMY Annual report, I can't even find a reference to Clairol. Only prescription drugs are discussed it seems. Clairol has stayed a part of BMY for years because the father of a previous BMY Chairman/CEO (Richard Gelb) founded the Clairol business. I'll guess next up for sale (for maybe $5Billion) would be the medical device business - another peripheral operation that according to analysts, has growth rates and operating margins lower than pharmaceuticals. BMY is slimming down and concentrating on its core business. The money they receive from PG will likely be used for coventures or acquisitions (gotta keep pushing product into that large BMY pharmaceutical salesforce). That cash infusion lets BMY expand its possibilities and assuage investors' fears that upcoming drugs sales/profits won't be enough to overcome those drugs coming off patent. (That's "assuage" imo - those fears might still come true) Maybe there'll be some stock buyback. (Debt's already at a low level, so I'll guess they won't pay it down more.) The result should eventually make it easier to compare BMY to other pharmaceutical companies and maybe improve BMY's relative p/e. I'd say the deal's good for PG too. They get an opportunity to bring fresh perspective to Clairol - and they're already in the beauty business, get to use their marketing and promotional expertise, and get to add sales to their top line. PG sales have been relatively flat - relative, imo, to the earnings increases they've reported in recent years. Increasing sales, even if they have to buy those sales, is important - imo - if PG wants to be considered anywheres near a 'growth' stock. Paul.

To: jeffbas who wrote (12527)	5/28/2001 7:32:12 PM
From: Bob Rudd	Respond to of 78744

Jeffrey: Interesting insight <<BMY chose to sell a business for $3B after taxes which an intelligent buyer (P&G) thought would give a decent return on $4.95B>> Hadn't thought of the tax difference that way. My concern, which may run bit contrary on a thread that highly values cash on the books, is what do they do with that cash. I'd rather look at them when that card is showing because studies have shown 2/3's of acquisitions fail to cover the deal premium. Whether BMY's next deal with that cash does or not, I'd bet the market drops them when a deal is announced. Also, the recent Senate shakeup could be unfavorable: With free drugs for seniors being a potential negotiating chip, there could be some bad news flow from DC.

To: jeffbas who wrote (12527)	5/29/2001 11:54:20 PM
From: Spekulatius	Respond to of 78744

BMY - Clairol sale Jeffrey, Pauls answer was pretty good, but here is my take. BMY decided to sell Clairol instead of spinning it off tax free to shareholders, because the company is worth more for a PG than as a standalone entity. The reason for this is that Clairol was losing market share and needed and overhaul. In addition, cost saving of about 100M$ for PG add value for the seller as well as for the buyer. BMY does not need the money desperately and decides about spinoff or outright sale on a case by case basis. For example, the orthopedics devision Zimmer will be spun of tax free because it is vailable as a standalone company.