Bristol-Myers' (BMY) Acquisition of Celgene Looks Certain

Bristol-Myers Squibb Company’s BMY acquisition offer for Celgene CELG received a fresh lease of life following endorsement from two major advisory firms, Institutional Shareholder Services (“ISS”) and Glass Lewis. The completion of acquisition will make the deal the largest in the history of the pharmaceutical industry.

Glass Lewis and ISS advise large institutional investors in matters related to vote on proxy proposals as well as corporate governance. Both the firms have endorsed the strategic deal, which may lead to several institutional investors voting in favor of the deal on Apr 12.

Bristol-Myers’ shares have declined 8.2% so far this year against the industry’s gain of 4.9%.

We remind investors that Bristol-Myers announced in January that it will acquire Celgene for an equity value of approximately $74 billion or more than $90 billion including debt. The deal is expected to close in the third quarter of 2019. However, the deal faced major opposition from two of its large shareholders, Wellington and Starboard.

Starboard had urged all shareholders to support its proposal to vote against the deal. However, it has decided to withdraw the campaign following ISS and Glass Lewis’ support. Starboard, however, will go per its plans and vote against the deal as it believes the acquisition to be a loss-making deal.

Per Starboard’s argument, Bristol-Myers’ offer of one of its common stock and $50 for each Celgene’s shares is overpriced. Starboard is also skeptical about the success of pipeline candidates as portrayed by Bristol-Myers. Moreover, it raised questions on the performance of Bristol-Myers’ management.

Bristol-Myers expects the acquisition to create synergies with market leading portfolio of oncology and cardiovascular drugs. The merged entity will have nine blockbuster drugs in its marketed portfolio and is likely to generate $45 billion in cash flow in first three years. Bristol-Myers also expects to launch six products with blockbuster potential from the pipeline of the merged entity.

Bristol-Myers’ top drug, Opdivo, lags its competitors – Merck’s MRK Keytruda and Roche’s RHHBY Tecentriq – which are already approved in the lucrative first-line lung cancer. An acquisition, which can diversify its portfolio of marketed drugs and boost its pipeline, will change the course of the company’s share price movement. The company’s shares have been consistently declining for the past few years. However, the deal will add considerable debt to Bristol-Myers’ balance sheet.

We remain on the sidelines until the acquisition is complete and the synergies pan out as expected.

Bristol-Myers Squibb Company Price


Bristol-Myers Squibb Company Price | Bristol-Myers Squibb Company Quote

Zacks Rank

Bristol-Myers currently has Zacks Rank #3 (Hold).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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