Activist investor Starboard Value has reportedly been working behind the scenes to gauge Bristol-Myers Squibb shareholders’ support for the company’s $74 billion Celgene deal. But the company’s largest investor stepped right into the spotlight with its thumbs-down.
Wednesday, Wellington Management—which owns about 8% of Bristol’s shares and ranked as its largest institutional shareholder as of earlier this week—came out publicly against the “risky” buyout.
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Wellington “does not believe that the Celgene transaction is an attractive path towards” a business that “secures differentiated science and broadens the future revenue base,” it said in a press release. The agreement terms offer “Bristol shares to Celgene shareholders at a price well below implied asset value,” the fund said, and successfully executing the transaction could be harder to pull off than company execs have outlined.
Celgene investors weren’t happy with the news, and they sent shares crashing by more than 8%. Bristol’s stock, on the other hand, drifted upward.
Wellington’s position may have been just what proxy brawler Starboard was hoping to hear. Bristol-Myers confirmed last week that Starboard had taken a stake in the company after the deal was announced, and though it’s not yet clear what Starboard plans to do, the investement firm could try to thwart the deal if it finds enough discontented Bristol shareholders. And to that end, Starboard has reportedly brought on a proxy solicitor to take investors’ temperature on the Celgene buy.
RELATED: Bristol-Myers confirms activist Starboard has its shares. And it wants board seats, too
Meanwhile, Starboard has been clear about one thing: It wants board seats. It’s nominated five new directors, including its own CEO, Jeffrey Smith, and investors will vote on that group at an as-yet-unscheduled meeting. Thing is, that meeting will take place after BMS investors vote on the Celgene deal in April, a fact that’s led analysts to believe the transaction will close as scheduled.
The “probability of a third-party buyer for Bristol-Myers Squibb” before the April vote is “very low,” BMO Capital Markets analysts wrote recently, adding that “we do not believe a potential activist can change that.”
