UPDATE 5-Mead Johnson up more than 10 pct in debut

Wed Feb 11, 2009 4:32pm EST

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(Adds closing stock prices for Mead Johnson and Bristol)

By Phil Wahba

NEW YORK Feb 11 (Reuters) - Mead Johnson Nutrition Co (MJN.N) shares rose more than 10 percent in their debut Wednesday, after the company launched the largest U.S. initial public offering in nearly 10 months, and the largest globally in 2009, even as the IPO market continues to struggle.

Shares of Mead Johnson, a unit of Bristol-Myers Squibb (BMY.N) known for its infant formula brand Enfamil, started trading on the New York Stock Exchange at $26, an 8.3 percent premium over the $24 at which they were priced Tuesday evening.

Mead Johnson closed at $26.43, up $2.43, or 10.13 percent, in trading on the New York Stock Exchange, after rising as high as $27.07 earlier in the day.

"We've had such a hiatus in the marketplace that when an IPO comes along with a good footprint, investors feel good about the name, and respond," said David Menlow, president of advisory firm IPO Financial.com

In a statement, Bristol-Myers said the Mead Johnson IPO, which raised $720 million, would allow it to strengthen its capital structure and focus on its biopharma business.

Bristol-Myers will retain an 85 percent stake in Mead Johnson, whose IPO had been expected to price between $21 and $24, and has indicated it would keep a stake of at least of 80 percent for the foreseeable future. Bristol-Myers will also keep the bulk of voting rights.

"We've operated separately on research and development and sales," Mead Johnson Chief Financial Officer Peter Leemputte told reporters on a conference call.

"We're ready to act as a stand-alone -- their interests are completely aligned with ours," he said.

Bristol Myers Squibb's shares closed at $22.63 Wednesday, up 36 cents, or 1.62 percent, on the New York Stock Exchange.

Mead Johnson plans to use the IPO proceeds to pay off loans from other Bristol Myers subsidiaries, according to a regulatory filing.

Mead Johnson is the first stand-alone company specializing in pediatric nutrition to go public. Its main competitors are Nestle SA (NESN.VX), Abbott Laboratories (ABT.N) and Wyeth WYE.N.

The company sold 30 million shares, more than the 25 million it originally planned.

Underwriters, led by Citigroup (C.N) and Morgan Stanley (MS.N), have the option to purchase another 3.75 million shares to cover over-allotments, and stand to make fees of about $36 million.

NO SIGH OF RELIEF

Mead Johnson's IPO broke a 12-week drought and was the first to launch since online university operator Grand Canyon Education Inc (LOPE.O) went public in November, and only the second since August.

But it may be too soon to call an end to the worldwide IPO slowdown.

With stock markets worldwide reeling from large declines and high volatility since last summer, investors have become risk averse, preferring established companies over new stock issues.

In the United States, IPO proceeds fell 43 percent in 2008 from 2007, with worldwide declines of 71 percent over the same period.

But as a large, quickly growing company carved out of a major multinational, Mead Johnson is not typical of most IPO candidates.

"This is not the all-clear signal to the industry," Menlow said.

Mead Johnson's IPO is nine times larger than the next largest IPO in 2009 so far globally, an $80 million deal by Etihad Atheeb Telecommunications Co, listed on the Saudi Exchange.

There has not been an IPO in Europe this year, and excluding Mead Johnson, there have only been 13 IPOs yielding a total of $186 million worldwide.

By this point last year, there had been 66 IPOs worldwide that raised proceeds of $6.8 billion, according to Thomson Reuters. (Reporting by Phil Wahba; Editing by Steve Orlofsky, Brian Moss, Richard Chang, Gary Hill) (phil.wahba@thomsonreuters.com; +1 646 223 6128; Reuters Messaging: phil.wahba.reuters.com@reuters.net)

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