Bristol-Myers Squibb announced its bid to acquire Celgene on January 3, 2019. However, the deal hit a snag. Bristol-Myers Squibb is now fighting back, making efforts to sell the deal to its shareholders.
Bristol-Myers Squibb announced its bid to acquire Celgene on January 3, 2019. However, the deal hit a snag. One of its biggest shareholders, Wellington Management Company LLP, has objected to the acquisition. Wellington owns about an 8 percent stake in Bristol-Myers. Another BMS shareholder, Starboard Value, also opposes the deal. Starboard has about a 1-percent ownership share. Starboard, in an open letter, called it “poorly conceived and ill-advised.” Another group, Dodge & Cox, who opposes the deal, has a 2-percent stake.
Bristol-Myers Squibb is now fighting back, making efforts to sell the deal to its shareholders. In an open letter to stockholders, Bristol-Myers outlined the advantages of the deal, citing four specific points. They include:
- Growing a stronger commercial presence in the company’s key disease franchises led by “high performing commercial teams.”
- Launching “exciting new medicines,” including six in the near future.
- “Advance a significantly enhanced early-stage pipeline; and”
- Integrate a range of research-and-discovery modalities that will “further strengthen our pipeline.”
Bristol-Myers also pointed out that it expects to have $45 billion in expected free cash flow generation during the three years after the deal closes. It plans to maintain strong investment grade credit ratings while continuing with its current dividend policy for both Bristol-Myers Squibb and Celgene shareholders. It also assured investors the company will have “significant financial flexibility” to take advantage and exploit its enhanced late- and early-stage pipeline.
Giovanni Caforio, Bristol-Myers Squibb’s chairman and chief executive officer, stated, “Together with Celgene, we are creating an innovative biopharma leader, with leading franchises and a deep and broad pipeline that will drive sustainable growth and deliver new options for patients across a range of serious diseases.”
He goes on to say, “As a combined entity, we will enhance our leadership positions across our portfolio, including in cancer and immunology and inflammation. We will also benefit from an expanded early- and late-stage pipeline that includes six expected near-term product launches.”
Recently, Bristol-Myers Squibb and Celgene filed with the Securities and Exchange Commission strongly urging shareholders to submit their proxy votes as quickly as possible whether they plan to attend the April 12, 2019 Special Meeting or not. The meeting is when the official vote on whether Bristol-Myers Squibb will buy Celgene will take place.
Under the terms of the deal, Celgene shareholders will receive 1.0 Bristol-Myers Squibb share and $50 in cash for each share of Celgene. Celgene shareholders will also receive one tradeable Contingent Value Right (CVR) for each share of Celgene. This entitles the holder to receive payment when Celgene hits specific future regulatory milestones. The total equity value of the deal is about $74 million.
In an infographic accompanying the letter to shareholders, the companies further expanded on the advantages of the deal. They note the merged companies will have 10 Phase III assets, six near-term product launches, and a “robust early- and mid-stage pipeline” that includes 21 immuno-oncology and solid tumor products, 10 oncology-hematology products, 10 immunology and inflammation products, and nine products for cardiovascular and fibrotic diseases.
Its franchises include the top, Number One in oncology led by Opdivo, Yervoy, Revlimid and Pomalyst. It will also have the top 5 in immunology and inflammation led by Orencia and Otezla, and another top spot in cardiovascular diseases led by Eliquis.
Mark J. Alles, Celgene’s chairman and chief executive officer, stated in the open letter, “Combining with Bristol-Myers Squibb, we are delivering immediate and substantial value to Celgene shareholders and providing them meaningful participation in the long-term growth opportunities created by the combined company.”
Wellington, on its part, says BMS should be active in business development and M&A but doesn’t believe the Celgene deal “is an attractive path towards accomplishing this goal.”
Wellington says BMS shareholders have to accept too much risk. They also disagree with the terms offered to Celgene stockholders. Wellington also argues that the deal is likely to be more difficult than BMS claims. Thirdly, the investment firm argues that “alternative paths to create value” for BMS shareholders could be more attractive, although it doesn’t specify what those “alternative paths” might actually be.
