ISS Green Lights Celgene Takeover of Bristol Myers

Shares of Celgene Corporation soared Friday after Institutional Shareholder Services recommended that investors should vote in favor of the company’s takeover of Bristol Myers Squibb.  With the vote still a couple weeks out (April 12), the influential shareholder advisory group is fully on board with the cancer drug specialist spending $74 billion on the merger.  

Bristol-Myers offered Celgene’s investors nearly equivalent shares at a ratio of one Bristol Myers share plus $50 cash per every Celgene share in holding.  In addition, Bristol Myers offered special rights that will mature when the newly merged group reaches specific business targets. 

At the time of the original announcement, then, this deal valued Celgene at $102.43 per share. This is a nearly 54 percent premium on the closing price from the previous session.  In all, then, the combined group will be 69 percent Bristol-Myers-owned and will have an impressive portfolio of nine drugs which, together, generate in excess of $1 billion in sales, annually. 

ISS comments on the deal, “Overall, the deal’s strategic rationale is sound. The two companies have a complementary overlap in therapeutic focus, and the transaction diversifies BMY’s revenue stream … The transactions also significantly enhances BMY’s pipeline, raising the number of late-stage drugs from one to six.  Moreover, the combination could result in meaningful synergies—the certainty of which seems bolstered by the facts that the companies have headquarters in New Jersey as well as overlapping R&D centers.”

While Britstol-Myers argues that the deal makes excellent strategic and prudent financial sense, the company’s shareholders—namely Starboard Value and Wellington Management—are challenging the proposal. They argue, in fact, that this is “a highly risky and likely value-destructive acquisition.”  After all, shares of BMY showed up at 0.85 percent lower in New York, after ISS released the statement.  The stock traded at $47.44, which extends the decline since the original announcement of the Celgene deal; around 9.5 percent. 

Of course, the ISS announcement seems to have given a bump to Celgene shares, which were up 6.84 percent—to $93.44—by late morning. This move would value Celgene shy of $68 billion.