M&A

As opposition mounts against Celgene deal, Bristol-Myers tells shareholders the planned buyout is the best bet in a scarce market

Facing brutal opposition against its planned $74 billion acquisition of Celgene, Bristol-Myers Squibb is now scrambling to convince shareholders that its takeover of the biotech — tarnished by a poor performance under CEO Mark Alles — is indeed a good idea.

In an open letter to shareholders on Wednesday, Bristol-Myers $BMY made it clear that a Celgene $CELG buyout was imperative to reinvigorate its growth.

“Given the scarcity of attractive biotech opportunities, high premiums paid in bolt-on acquisitions, a longer timeline and the likelihood of competitive auctions that reduce the probability of prevailing, Bristol-Myers Squibb determined that acquiring Celgene’s Big-5 late-stage pipeline, plus its 22 Phase 1 and 2 clinical programs, would represent a bundled ‘string-of-pearls’ that in totality offers a greater value creation opportunity than other strategic alternatives,” the company underscored in bold.

It comes as no surprise that Bristol-Myers is shopping. Its flagship immuno-oncology treatment Opdivo hasn’t quite lived up to sky-high expectations, versus Merck’s $MRK Keytruda. But for the cavalry of naysayers — Wellington Management (Bristol-Myers’ largest shareholder); Starboard (activist investor who nabbed a 1 million-share stake in the lead up to the proposed transaction) and Dodge & Cox (Bristol-Myers’ 5th largest investor that is reportedly not keen either) — Celgene is hardly the answer. The large biotech is facing a patent cliff with its cash cow Revlimid, and the future of its top R&D prospects is uncertain.

Bristol-Myers, however, is wooing its investors on the basis that the Celgene deal is the best bet out there in biopharma land, and has come with an “attractive price,” given the breadth of Celgene’s portfolio: “BRISTOL-MYERS SQUIBB + CELGENE = A POWERFUL VALUE CREATION OPPORTUNITY FOR OUR SHAREHOLDERS.” 

For the first time Bristol publicly provided the sums-of-the parts valuation for the deal, noted Credit Suisse’s Vimal Divan. The company allocated about $55 billion for Celgene’s marketed products and more than $20 billion for synergies, suggesting it is acquiring the “entire Celgene pipeline for a value of ~$15 billion,” Divan wrote in a note.

Activist investor Starboard has suggested that Bristol-Myers could become a tempting takeover target in its own right if they drop the Celgene deal. For Bristol-Myers shareholders the question is whether they should settle for Celgene, or hope for something better to come along.

For Barclay’s Geoff Meacham the Celgene deal is a rational move by Bristol-Myers.

“Beyond the lack of alternatives that could provide a similar level of upside to the proposed deal (we note that the opposing shareholders have not come forward with any sort of concrete Plan B, with no over-the-top bidders in sight), we think the financial terms of the deal are very favorable and we’d characterize the Celgene pipeline as quite strong and fairly de-risked already. For example, the recent acceptance of the fedratinib and award of priority review shows that Celgene is executing from a regulatory perspective,” Meacham wrote in a note on Wednesday.

“Ultimately, barring a realistic alternative capable of providing similar material upside, we expect the majority of shareholders to vote in favor of the deal April 12th, given we continue to see strong strategic and financial rationale to support the transaction.”


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Research Scientist - Immunology
Recursion Pharmaceuticals Salt Lake City, UT
Director of Operations
Atlas Venture Cambridge, MA

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