CELG Celgene Corporation

By Micah Maidenberg 

Activist investor Starboard Value LP detailed its opposition to Bristol-Myers Squibb Co.'s proposed acquisition of Celgene Corp. and said it plans to organize other shareholders to oppose the $74 billion deal.

In a letter addressed to Bristol-Myers shareholders and released Thursday, Starboard criticized Bristol management and its board for what it said were years of weak performance, saying the drugmaker hasn't "earned the right, in our view, to execute on a 'bet the company' acquisition."

"We believe the risks inherent in this acquisition paired with the long-term poor results at Bristol-Myers make it untenable to support such a transaction," the letter said.

A spokeswoman for Bristol-Myers didn't immediately have a comment, and a spokeswoman for Celgene couldn't be reached.

Shares of Bristol-Myers rose 0.8% in Thursday morning trading, while Celgene's stock had dropped almost 8%.

Starboard alleged in the letter that Celgene will lose significant patent protections in the coming years, creating risks for the combined company. The so-called patent cliff for Celgene's multiple myeloma drug Revlimid, a top seller, will force Celgene to replace more than 60% of its total sales in the next seven years, Starboard said.

The investor also characterized Celgene's drug pipeline as extremely risky, and one that will require major research and development funding.

Starboard also described the takeover as "hastily construed and perhaps done to thwart potential strategic interest" in Bristol.

Bristol-Myers said last week in a filing that Starboard had acquired about one million shares in Bristol -- a fraction of the drugmaker's outstanding stock -- but indicated it could buy more. The Wall Street Journal previously reported that other investors including Dodge & Cox are also unhappy with the proposed deal.

The investor has acquired about one million shares in Bristol-Myers -- a fraction of the drugmaker's outstanding stock -- but other investors, including Dodge & Cox, are also unhappy with the proposed deal.

Wellington Management Co., an investment firm that has a stake of about 8% in Bristol-Myers, said Wednesday the proposed acquisition asks shareholders to take on too much risk and undervalues Bristol's stock.

The dissatisfaction that significant Bristol-Myers shareholders have voiced has caught some pharmaceutical industry observers by surprise.

"We may have miscalculated the passivity of large-cap investors when it comes to this deal," pointing to Wellington's opposition, Baird analyst Brian Skorney said in a note to clients.

Starboard also said in the letter it believes Bristol-Myers could move ahead as a more profitable, lower-risk stand-alone company, or seek to sell itself.

Write to Micah Maidenberg at micah.maidenberg@wsj.com

(END) Dow Jones Newswires

February 28, 2019 11:18 ET (16:18 GMT)

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