Merger Madness: Bristol-Myers Won't Be Sold
The Wall Street Journal ran one of those bizarre filler pieces their weekend speculating that because Bristol-Myers is at a 10 year low it might be a takeover target
Almost any stock at a ten year low is a takeover candidate unless it has some huge debt or liability issue, and while Bristol-Myers has $8 billion in debt, it also has $5 billion in cash and a $42 billion market cap.
While the company may sack its CEO because of his general incompetence and a federal probe into a deal meant to keep a generic version of BMY’s Plavix off the market, the companies real problem is that is has been poorly run.
Even Jim Cramer has suggested that the Bristol-Myer’s CEO should be fired. Cramer goes further by saying that the stock would move up immediately with a changing of the guard. But, it would not stay up.
Bristol-Myers revenue has been moving down slightly over the last three calendars years. So has operating income. Revenue in 2003 was $20.9 billion and operating income was $4.7 billion. In 2005, revenue moved down to $19.2 billion, and operating income to under $4.2 billion. Revenue in the March and June 06 quarters were both below revenue in the December 2005 quarter. The same holds true for operating income.
Novartis, which trades near its 52-week high at over $57 has shown substantial revenue growth in each of the last three calendar years. So has Johnson & Johnson, which, at $64.50 is near an annual high.
While most of the big drug makers trade at between three times and four times sales, BMY trades at a little over two times. Perhaps the board at Bristol-Myers would do shareholders the favor of waking up and getting a management that can bring decent returns. BMY is not going to get a 60% premium on a buyout. To get the stock back to that level, the company is going to have to earn it.
Douglas A. McIntyre can be reached at douglasamcintyre@gmail.com. He does not own securities in companies that he writes about.
Almost any stock at a ten year low is a takeover candidate unless it has some huge debt or liability issue, and while Bristol-Myers has $8 billion in debt, it also has $5 billion in cash and a $42 billion market cap.
While the company may sack its CEO because of his general incompetence and a federal probe into a deal meant to keep a generic version of BMY’s Plavix off the market, the companies real problem is that is has been poorly run.
Even Jim Cramer has suggested that the Bristol-Myer’s CEO should be fired. Cramer goes further by saying that the stock would move up immediately with a changing of the guard. But, it would not stay up.
Bristol-Myers revenue has been moving down slightly over the last three calendars years. So has operating income. Revenue in 2003 was $20.9 billion and operating income was $4.7 billion. In 2005, revenue moved down to $19.2 billion, and operating income to under $4.2 billion. Revenue in the March and June 06 quarters were both below revenue in the December 2005 quarter. The same holds true for operating income.
Novartis, which trades near its 52-week high at over $57 has shown substantial revenue growth in each of the last three calendar years. So has Johnson & Johnson, which, at $64.50 is near an annual high.
While most of the big drug makers trade at between three times and four times sales, BMY trades at a little over two times. Perhaps the board at Bristol-Myers would do shareholders the favor of waking up and getting a management that can bring decent returns. BMY is not going to get a 60% premium on a buyout. To get the stock back to that level, the company is going to have to earn it.
Douglas A. McIntyre can be reached at douglasamcintyre@gmail.com. He does not own securities in companies that he writes about.
posted by douglas mcintyre at 5:27 AM
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