Activist Investor Pans Deal At Bristol Activist Investor Hits Deal At Bristol -- WSJ
March 01 2019 - 02:02AM
Dow Jones News
By Micah Maidenberg
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (March 1, 2019).
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.
Bristol said it would review Starboard's letter and respond in
due course. In a written statement, the company defended its deal
for Celgene, saying the combined company would have a broad
portfolio of products and a robust pipeline, generating significant
financial benefits for shareholders.
"The Bristol-Myers Squibb Board and management team are
confident that our combination with Celgene Corporation will create
a premier biopharma company and deliver substantial benefits to our
stockholders," the company said. A spokeswoman for Celgene didn't
respond to a request for comment.
Shares of Bristol-Myers were up 2.5% on Thursday afternoon,
while Celgene's stock was off 7.5%.
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 significant
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.
Wellington Management Co., which owns about 8% of Bristol but
only controls the vote on less than one-quarter of those shares,
said Wednesday the proposed acquisition asks shareholders to take
on too much risk and undervalues Bristol's stock.
Bristol-Myers shareholders are set to vote on the deal April 12,
and a majority of the shares voted need to approve the deal for it
to pass.
Bristol also said last week that Starboard nominated five
potential directors to its board. Those directors would be voted on
at the company's annual meeting expected to be later this year.
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," Baird analyst Brian Skorney said in a
note to clients, referring to Wellington's opposition.
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
March 01, 2019 02:47 ET (07:47 GMT)
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