Bristol-Myers' record-breaking $74 billion biotech deal is in jeopardy

  • Bristol-Myers Squibb Co.’s $US74 billion takeover of Celgene is in jeopardy after Bristol-Myers’ second-largest shareholder turned against it.
  • Wellington Management, which owns a 7.7% stake in Bristol-Myers, laid out three reasons it opposed the deal.
  • The deal was questioned by investors and analysts since it was announced.
  • Watch Bristol-Myers Squibb and Celgene trade live.

The pharma giant Bristol-Myers Squibb Co.’s $US74 billion takeover of Celgene, the largest healthcare deal in history, is in jeopardy after Bristol-Myers’ second-largest shareholder turned against the deal.

Wellington Management, which has about $US1 trillion in client money and a 7.7% stake in Bristol-Myers, said in a press release out Wednesday evening that it did not support the proposed merger for three reasons.

“While Wellington agrees that Bristol-Myers should be active in business development that secures differentiated science and broadens the future revenue base, Wellington does not believe that the Celgene transaction is an attractive path towards accomplishing this goal,” the investment firm said.

“Wellington’s conclusion is based upon three tenets: 1) the transaction asks BMY shareholders to accept too much risk and the terms offer BMY shares to CELG shareholders at a price well below implied asset value; 2) execution success could be more difficult to achieve than depicted by Company management; and 3) alternative paths to create value for BMY shareholders could be more attractive.”

The deal, which paid investors of the biotech giant Celgene one Bristol-Myers share and $US50 cash for each Celgene share they owned, valued the New Jersey-based Celgene at about $US102.43 a share – a 54% premium to its closing price the day before the merger was announced.

A survey conducted by the Mizuho managing director Salim Syed shortly after the takeover was announced on January 3 found that more than 50% of the roughly 100 investors questioned said they were not happy with the deal. Wall Street analysts also voiced concerns.

“We are surprised that this deal occurred,” said the Cantor Fitzgerald analyst Alethia Young.

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