Under fire, BMS insists $74bn Celgene deal ‘next step in proven strategy’

Bristol-Myers Squibb has dismissed claims by investor groups that its proposed acquisition of Celgene “is poorly conceived and ill-advised.”

In January, Bristol-Myers Squibb (BMS) announced it had entered into an agreement to buy Celgene for $74 billion (€65 billion). But this week Starboard Value LP, which holds a stake of 1.63 million shares in BMS, criticized the deal in a letter to fellow shareholders.

“We believe that Bristol-Myers is deeply undervalued and the recent announcement of the Company’s proposed acquisition of Celgene Corporation (“Celgene”) is poorly conceived and ill-advised,” Jeffrey Smith, managing member of the New York-based investment adviser firm wrote.

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“We intend to vote all of our shares against the proposals related to the proposed acquisition, and, should the transaction be voted down by shareholders at the Company’s upcoming Special Meeting of Shareholders scheduled to be held on April 12, 2019 (the “Special Meeting”), we have also nominated a slate of director candidates who we would seek to elect at the 2019 Annual Meeting of Shareholders (the “2019 Annual Meeting”) to ensure that the Board is held accountable and that the Company focuses on exploring and executing on the best alternative for value creation at Bristol-Myers.”

The investment strategy firm said it formed its conclusions based on five primary views: 1) Celgene’s “massive patent cliff – among the largest in pharmaceutical industry history – which will serve as a major overhang on the Company’s shares in the years to come”; 2) Celgene’s perceived “risky pipeline”; 3) The idea that the transaction was hastily construed and perhaps done to thwart potential strategic interest in BMS; 4) The belief that the financial merits of the transaction, including combined synergies, is potentially misleading; 5) The concept that BMS will be more profitable as a standalone company.

Wellington Management Company, the largest institutional holder of BMS’ common stock which controls around 8%, has also stated it is against the proposed megamerger.

“While Wellington agrees that Bristol-Myers should be active in business development that secures differentiated science and broadens the future revenue base, Wellington does not believe that the Celgene transaction is an attractive path towards accomplishing this goal,” the investment management firm said.

BMS responds

BMS responded to the letter with it’s a statement claiming the benefits of the combination are significant.

“The Celgene transaction is the natural next step in Bristol-Myers Squibb’s proven strategy that has consistently delivered results for over a decade,” the firm said, adding it has seen consistently strong growth for 10 consecutive years.

“The combination with Celgene will create a leading biopharma with increased scale, while maintaining the same agility and a focus on delivering for patients in core disease areas of high-unmet medical need.”

Furthermore, the combined pipeline “provides significant near-, medium- and long-term opportunities for value creation,” the firm said.

“As a combined entity, we will enhance our leadership positions across our portfolio, including in oncology, immunology and inflammation and cardiovascular. We will also benefit from an expanded early- and late-stage pipeline highlighted by six expected near-term product launches, including five from Celgene, representing more than $15 billion in total revenue potential.”