Major Shareholders Team To Scuttle Bristol-Myers Squibb's $74B Celgene Buyout: What's Next?

Opposition to the buyout deal Bristol-Myers Squibb Co BMY negotiated with Celgene Corporation CELG in January is rising and could potentially impede the M&A momentum seen in the biotech space this year.

What Happened

Wellington Management Co, which owns an 8.3-percent stake in Bristol-Myers Squibb, said Thursday that it does not believe the Celgene deal is an attractive path toward accomplishing the goal of securing differentiated science and broadening Bristol-Myers Squibb's future revenue base.

Reacting to Wellington Management's stance, Bristol-Myers Squibb's CEO Giovanni Caforio reportedly said in an internal memo to employees that he is disappointed with the development and is continuing talks with shareholders to impress upon them the unique opportunity the deal presents for the creation of sustainable value.

Close on the heels of Wellington Management making its opposition public, activist investor Starboard Value — which also owns shares in Bristol-Myers Squibb — joined the chorus.

In a letter to shareholders, Starboard said it believes the Celgene acquisition is not in the best interest of Bristol-Myers shareholders.

The firm asked shareholders to vote down the "ill-advised" transaction and to vote for the slate of director candidates nominated by the activist investor at the 2019 annual meeting.

"Wellington's 8-percent ownership of BMY adds weight to Starboard's nomination of five BMY board seats and could mount a proxy fight," Bank of America Merrill Lynch analyst Ying Huang said in a Thursday note.

The analyst also brought up the possibility of Wellington and Starboard seeking a white knight to bid for Bristol-Myers Squibb — or working with the company's shareholders to block the Celgene deal.

Incidentally, Amgen, Inc. AMGN and Sanofi SA SNY are reportedly interested in buying out Celgene.

What's Next

The action now shifts to the Bristol-Myers Squibb's 2019 annual shareholder meeting scheduled for April 12.

"While we believe the BMY/CELG merger is still likely to take place, we see increased risk to the transaction ahead of the special shareholder meeting on April 12," Huang said. 

BofA said it has removed its investment opinion on Celgene, as it believes the shares of the company no longer trade on fundamentals.

Celgene shares were sliding 7.42 percent to $84.24 at the time of publication Thursday, while Bristol-Myers Squibb shares were up 1.95 percent at $51.96. 

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