Activist Investor Starboard Value Plans to Oppose Bristol Myers $74 Billion Proposal to Buy Celgene

Shares of Celgene Corporation took a sharp dip on Thursday after a key investor of Bristol Myers said its $74 billion takeover bid was both risky and expensive.  

On Thursday, Wellington Management added concern that the proposed deal for the cancer drug specialist, along with activist investor Starboard Value LP’s attempts to add supporters directly to the Bristol Myers board as a means to stop the deal. Wellington Management has an 8 percent stake in Bristol-Myers. Apparently there is a vote scheduled for April 12.  

Bristol-Myers had offered Celgene investors a one-to-one deal Bristol-Myers-to-Celgene shares with an additional premium of $50 per share. Also, Bristol-Myers offered Celgene special rights that they say will only pay off if the newly merged group meets specific business targets.  This deal assesses a value of Celgene to be $102.43, which is a premium of 53.7 percent over the closing price from the previous session. 

On this note, Celgene shares shed about 6.4 percent early on Thursday, with trades valued around $85.16.  On the other hand, Bristol Myers saw shares lift more than 1.1 percent, trading hands at more than $51.50 per share.  Combined, then, the group—which will be 69 percent Bristol-Myers-owned—will possess a portfolio of nine drugs that can collectively generate upwards of $1 billion in sales.

In a letter to Bristol-Myers shareholders, Starboard CEO Jeffrey Smith wrote, “Bristol-Myers is deeply undervalued and the recent announcement of the Company’s proposed acquisition of Celgene Corporation is poorly conceived and ill-advised.  There is a better path forward for Bristol-Myers, either a more profitable standalone company with a more focused, lower-risk strategy, on in a potential sale of the whole Company.”

Smith goes on to describe Starboard’s surprise at the proposal after learning of the company’s poor financial statement and stock price performance over the last couple of years.  

With that, Bristol Myers responded, “Since announcing the Celgene transaction on January 3, our Board and management team have had numerous conversations and meetings with our stockholders across our ownership base, including Wellington.  We believe that we are acquiring Celgene at an attractive price, and that this transaction presents an important and unique opportunity to create sustainable value.”

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