Bristol-Myers’ $74B Celgene Buyout Faces Opposition from Wellington

Xconomy New York — 

[Updated 2/28/19, 11:58 a.m. See below.] Bristol-Myers Squibb’s agreement to acquire Celgene for $74 billion is opposed by the New York pharmaceutical company’s largest institutional investor.

Wellington Management Group said Wednesday afternoon that while it agrees Bristol should be active in deals that add new science and expand the company’s revenue potential, Wellington “does not believe that the Celgene transaction is an attractive path towards accomplishing this goal.”

Shares of Bristol (NYSE: BMY) rose 2.5 percent to $50.25 each in after-hours trading.

Wellington, which holds approximately 8 percent of Bristol shares, said the deal asks Bristol shareholders to accept too much risk. Meanwhile, it undervalues shares of Bristol that Celgene (NASDAQ: CELG) shareholders would gain, Wellington argued. The investment firm added that achieving success following the deal could be more difficult than Bristol’s management portrays, and there are other paths to adding value that could be more attractive.

[The following three paragraphs updated with new details.] The Wellington announcement comes one week after another Bristol institutional shareholder, Starboard Value, boosted its stake in the company. Starboard is known for aggressively pressing for changes at its portfolio companies. In letter sent to Bristol shareholders on Thursday, the hedge fund wrote that it would vote against the deal and the its nominees to the company’s board of directors would  look for a better alternative. Starboard contends that Bristol’s financial performance has lagged its peers, and the Celgene deal comes with risks including a large number of drugs that are losing patent protection, such as the blockbuster multiple myeloma drug lenalidomide (Revlimid), which could start facing generic competition in three years. The firm also says the claims of efficiencies and savings from joining with Celgene are misleading.

“There is a better path forward for Bristol-Myers, either as a more profitable standalone company with a more focused, lower-risk strategy, or in a potential sale of the whole Company,” Starboard wrote in the letter.

Bristol issued a statement responding to Starboard midday Thursday. In a brief letter to Bristol shareholders filed with securities regulators late Wednesday, Bristol CEO Giovanni Caforio expressed disappointment in Wellington’s stance and reiterated his support for the Celgene acquisition. “We believe that with continued discussion, shareholders will recognize the enhanced value this transaction would create and continue to believe in the merits of the deal,” he wrote.

Bristol announced its agreement to acquire Celgene in January. The deal calls for Celgene shareholders to get $50 in cash and one Bristol share for each Celgene share that they own. They’ll also get contingent value rights for their shares, tradeable options that could lead to additional payments pegged to the approval of three late-stage Celgene drugs.

The boards of directors of both Bristol and Celgene have approved the acquisition. The deal still needs approval of shareholders from both companies. Bristol has scheduled an April 12 vote.

Photo by Joao-Pierre S. Ruth