UPDATE: Two of BMS’ Biggest Shareholders Object to Celgene Acquisition
Wellington Management Company LLP, which owns about an 8 percent stake in BMS, announced Wednesday that it did not support the $74 billion acquisition announced earlier this year. In a brief statement, Wellington said it believes BMS should be active in business development that involved mergers and acquisitions, but the investment management firm does not believe the Celgene deal “is an attractive path towards accomplishing this goal.”
Wellington listed three primary reasons for not supporting the deal that BMS Chief Executive Officer Giovanni Caforio will create “the number one oncology franchise” for both solid and hematologic tumors. Caforio said the pillars of the combined pipeline will be built on the blockbuster checkpoint inhibitor Opdivo, as well as Yervoy and Celgene’s powerhouse drugs, Revlimid and Pomalyst. And, Caforio also pointed to a cardiovascular pipeline led by Eliquis and a pipeline of inflammation drugs helmed by Orencia and Otezla.
Wellington said the transaction asks BMS shareholders to accept too much risk and also disagreed with the terms offered to Celgene stockholders. If the merger is completed, Celgene stockholders immediately prior to the completion of the merger will be entitled to receive $50 in cash, one share of Bristol-Myers Squibb common stock and one contingent value right for each share of Celgene common stock held by them.
Wellington also questioned how easy the merger would be. The company suggested it will be much more difficult than BMS management has claimed. And for its third point, Wellington said that “alternative paths to create value” for BMS shareholders could be more attractive. In its announcement, Wellington did not mention what those alternatives could be.
This morning, Starboard Value, another shareholder of BMS, came out in opposition to the deal. In an open letter, Starboard called the deal "poorly conceived and ill-advised." The investment group said it will solicit other stakeholders in BMS to block the deal from going forward. Starboard raised concerns of Celgene's expiring patents and said that BMS management must not have accounted for Revlimid's revenue declines of 90 percent by 2026 due to expiring patents. Revlimid, which is Celgene's biggest revenue driver, is expected to begin facing generic competition in 2022.
After Wellington issued its opposition, shares of BMS slipped 5 percent, but have since begun to climb this morning.
This is not the first time that a stakeholder has objected to a mega-merger. Last year during the Takeda acquisition of Shire, a group of Takeda shareholders also objected to the deal. Kazu Takeda, one of the descendants of the founders of the 237-year-old company, became a primary spokesperson for the group of shareholders who opposed the manner in which the company was scaling up. Despite the objections, the deal was finalized in January.
The BMS deal for Celgene has not been finalized. If it goes through, some Celgene executives stand to walk away very wealthy. First reported by Fierce Pharma, Celgene CEO Mark Alles will receive approximately $27.9 million if he departs after the BMS merger closes. Citing a proxy statement filed with the U.S. Securities and Exchange Commission, Fierce noted that Alles will receive about $17 million in equity, $10 million in cash, as well as miscellaneous perks and benefits. That’s about three times his current salary and benefits, according to the report.
In addition to Alles, a few other Celgene executives will also benefit financially from the merger. Three executives will receive 2.5 times their salary and bonus if they leave after the BMS deal closes, according to the report. Chief Financial Officer David Elkins could snag $15.1 million, Peter Kellogg, the chief strategy officer, could walk away with $11.9 million and R&D head Rupert Vessey could take home $12.2 million.