Weaned From Bristol-Myers Squibb, Mead Johnson Expands With Nutritional Baby Formula

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Researched by Industrial Info Resources (Sugar Land, Texas)--Bristol-Myers Squibb (NYSE:BMY) (New York, New York) is divesting its 83% majority stake in its last non-biopharmaceutical holding, Mead Johnson Nutritional (NYSE:MJN) (Evansville, Indiana). This divesture comes only 10 months after Mead Johnson's initial public offering. In this time, Mead Johnson's stock has almost doubled from $24 per share to about $43 per share, and the company has embarked on a major and non-traditional expansion at its Evansville site.

In the past, the Evansville site has produced only liquid pediatric nutritional products, but due to consumer demand and generous city and state tax incentives, the company is in the midst of constructing an approximately 30,000-square-foot powder blending and packaging operation. However, Mead Johnson is not only reacting to consumer preference for powdered-form nutritionals and tax incentives in deciding to construct a new facility. By applying the old adage "buy low and sell high," the firm is prudently using its capital resources, which benefits the consumer.

Arguably, economic health and recovery are largely based on consumer confidence and attitude. Since the economic downturn of 2008, construction, and specifically construction in manufacturing, has seen a major slowdown. The bright side and much-overlooked benefit of these economic doldrums is that construction costs are dramatically reduced due to a smaller pool of projects and increased competition among architectural, engineering and construction firms. It is often the policy of manufacturing to be financially liquid and secure assets during hard times--but ironically, it is the best time for these firms to begin any major expansion or renovation.

By using its capital resources at this time, Mead Johnson is conserving a portion of its substantial bankroll, thus allowing itself to reinvest these funds in higher-wage jobs, process improvements, research and development, and future expansions. Mead also has chosen to assist the local economy of Evansville by hiring local general contractor Deig Brothers Lumber and Construction Company Incorporated (Evansville, Indiana) to build the project.

It is human--and corporate--nature to be conservative and recoil in hard economic times, but if everyone in America was as prudent as Mead Johnson Nutritional, then our economy would be in much healthier shape.

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