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Merck to spin off Medco
With IPO market weak, shares of the pharmacy benefits unit will be given to Merck stockholders.
April 22, 2003: 1:56 PM EDT

NEW YORK (CNN/Money) - Merck & Co. Tuesday abandoned a planned public offering of its Medco Health Solutions Inc. pharmacy benefits unit, saying instead it will spin off 100 percent of Medco to Merck shareholders by mid-year.

A company spokesman blamed the change on the weak IPO market. Only five companies have gone public this year, according to Thomson Financial, down from 148 offerings during the same period in 2000.

"The IPO market has been awfully weak and has never really recovered," Merck spokeswoman Janet Skidmore said.

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Merck, the world's No. 3 drugmaker, said it expects the one-step transaction to be tax free to Merck and its shareholders. The move was approved by the company's board Tuesday.

Merck has been trying to separate itself from the pharmacy benefits unit in a move that would focus the Whitehouse, N.J.-based company on developing and marketing drugs.

"With the separation, the market can now value each of the companies as 'pure plays' in the pharmaceutical and [pharmacy benefits management] businesses, respectively," Merck CEO Raymond V. Gilmartin said.

The IPO, like many others postponed last year, was shelved in 2002 as investor demand for new offerings dried up.

As part of the deal, Medco will raise debt financing around the time of the spinoff to pay Merck a cash dividend.

Merck (MRK: up $2.05 to $59.01, Research, Estimates) stock rose more than 3 percent Tuesday afternoon.  Top of page




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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.