Two key voice in corporate brawls have weighed in on pharmaceutical giant Bristol-Myers Squibb’s $74 billion acquisition of biotech Celgene — and Bristol-Myers management will be sighing in relief.
Institutional Shareholder Services (ISS) and Glass Lewis, two influential advisory services companies, have recommended in favor of the deal, which has faced an unusual level of pushback from Bristol-Myers shareholders, including some of its largest stakeholders.
ISS called the deal’s rationale “sound” overall, while Glass Lewis described it as an “attractive” combination.
“Based on our research, review and analysis, we believe the proposed merger is strategically compelling and presents the opportunity for potentially significant returns to shareholders of the combined company, including existing Bristol-Myers holders,” Glass Lewis’s report said.
Bristol-Myers shareholders are set to vote on the deal, which was announced early this year, at an April 12 meeting.
Celgene shares surged 7.4% in Friday morning trade after the news, and Bristol-Myers shares slumped 0.4%.
Jefferies analyst Michael Yee predicted earlier this month that ISS would be supportive, likely allowing the deal to go through.
Some investors, including vocal activist investor Starboard, may have been hoping that instead of buying Celgene, Bristol-Myers could instead itself get acquired.
But Bristol-Myers management said this month that the company hasn’t had acquisition talks since 2017, and even then nothing of much substance.
Starboard has other arguments, too, though Jefferies’ Yee said his team didn’t agree with all of them. Some of Starboard’s key ones include:
- Celgene isn’t a good acquisition target because a large number of its medicines are poised to lose patent protection soon.
- Celgene’s other experimental drugs, which it hopes will get approved and become profitable products, are very risky.
- The Celgene deal was done hastily, without enough due diligence, and for “defensive” reasons, to thwart an acquisition of Bristol-Myers.
But according to Bristol-Myers, ISS and Glass Lewis found, instead, that:
- The two companies, which focus on similar types of medicine like cancer and blood diseases, would combine well together.
- They also have lots of potential for cost-cutting synergies, ISS found. Its report noted that both companies are headquartered in New Jersey and have “overlapping” centers where they do research and develop their drugs.
- The experimental drugs that Celgene has in development could give Bristol-Myers a lift and help the pharma giant diversify where it gets its sales from. One cancer drug, Opdivo, brought in nearly 30% of Bristol-Myers’ revenue last year.
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