Bristol-Myers Names Jim Cornelius As CEO, But Merger Talk Won’t Go Away

After eight months of hemming and hawing as interim ceo, the board member and former Guidant ceo agrees to remain for another two years.

“As we conducted an extensive and thorough ceo search, it became increasingly clear that Jim was the ideal person to continue leading our company,” says Jim Robinson, the drugmaker’s chairman. “It was obvious to the board that his knowledge of the company and the dynamics facing the industry today were vital to our future progress. He has done a splendid job as ceo, and we couldn’t be more pleased that he has agreed to stay in this role.”

Of course, the challenges also made it difficult to find suitable candidates. Which challenges? Well, there’s the two-year Deferred Prosecution Agreement with the US Attorney in NJ that runs for another month. There’s the big hit to sales thanks to the Plavix scandal a few months ago. And then there was Cornelius’ acknowledgement that a deal wouldn’t be ruled out. Not an easy situation for someone wearing a parachute over their Brooks Brothers suit.

So will this put to rest merger talk? Cornelius’ statement can be read different ways:

“The board and I now have challenged our leaders to conduct a thorough strategic review of our business with the aim of growing revenue, expanding margins and improving cash flows…A key priority of mine will also be management development and succession planning to ensure that the company continues to benefit from strong and effective leadership.”

Tim Anderson of Prudential Equity thinks a deal is still likely:

Naming Cornelius as “permanent ceo will do little to stop the investment cdommunity’s general belief that the company will be sold. We continue to think that a potential deal may still happen at some point – the most likely bidder remains Sanofi-Aventis in our opinion, because of the long-standing Plavix/Avapro collaboration.

Cornelius was appointed as interim ceo following Peter Dolan’s ouster in 2H’06, and there has been great speculation as to when/whether a permanent ceo would be announced. A generally held belief is that Bristol announcing news of a permanent ceo could rapidly cause the “take out premium” built into the share price to disappear (maybe $2-3 in value).

The choice of Cornelius, however, should lessen the impact substantially. It may, in fact, might further fuel the notion that Bristol will be sold eventually. This is because many investors won’t likely be quick to forget that Cornelius was responsible for selling medical device company Guidant to Boston Scientific last year.”

Ditto, says Barbara Ryan of Deutsche Bank:

The drugmaker “has given James Cornelius a two-year contract as ceo. Bristol-Myers obviously could not lure an external candidate and we view this as a purely cosmetic move to minimize the distractions/questions created by his interim status. The outlookremains unchanged in our view, with a potential takeout still a likely possibility.”

Bristol-Myers press release.[tags]Bristol-Myers Squibb, Jim Cornelius[/tags]