Home Health Care Could institutional investors put the kibosh on the $74B Bristol-Celgene deal?

Could institutional investors put the kibosh on the $74B Bristol-Celgene deal?

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Two of the largest shareholders in Bristol-Myers Squibb have come out against the company’s plan to acquire Celgene, threatening to thwart the deal.

On Wednesday, Boston-based Wellington Management Co. – whose clients own 8 percent of New York-based BMS and which is the largest institutional holder of the company’s stock as of Monday – said it would not support the deal. “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,” a statement by the firm read.

In particular, Wellington said the transaction asks BMS shareholders to accept too much risk while offering the company’s shares to Celgene shareholders at a price below their value. Moreover, the deal could be harder to execute than the company suggests, and there are potential alternative paths to create value.

And on Thursday, Starboard Value also expressed opposition, saying in a letter to BMS shareholders that the drugmaker is deeply undervalued, while the proposed acquisition of Summit, New Jersey-based Celgene is “poorly conceived and ill-advised.” The New York-based firm said it planned to vote all its shares against the deal. Its own conclusion was based on Celgene’s “massive patent cliff,” with the patent expiration on Revlimid (lenalidomide) in particular requiring the company to replace more than 60 percent of its revenue in the next seven years. Moreover, Starboard said, Celgene’s pipeline carries significant risk; the firm regards the deal as “hastily constructed” and based on “potentially misleading” analysis of the its financial merits; and BMS would be better served continuing on its own or being sold.

Shares of Celgene were down approximately 8 percent on the Nasdaq Thursday.

In response to the Starboard letter, BMS defended the deal, saying it was confident the acquisition of Celgene would create “a premier biopharma company and deliver subtantial benefits to our stockholders.” Among other things, BMS said the companies’ combined pipelines would create significant value-creation opportunities, and that the combined company would be well-positioned for leadership in oncology in the next several years.

The companies announced the deal in January, whereby BMS would buy Celgene for $74 billion.

Photo: designer491, Getty Images

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