Celgene slumps as Bristol-Myers shareholder resists merger

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(Reuters) – Shares of Celgene Corp dived 8 percent on Thursday after a major shareholder in Bristol-Myers Squibb Co came out against a $74 billion merger that would be the pharmaceutical world’s biggest ever takeover.

In a letter to employees dated Wednesday and filed to regulators on Thursday, Bristol-Myers expressed disappointment with the opposition of institutional investor Wellington Management to the Celgene deal, and said it would press ahead.

Wellington, which owns nearly 8 percent of Bristol-Myers, said after market hours on Wednesday that the buyout was too risky and expensive and Wall Street analysts said there was a risk that other concerned shareholders may be emboldened to make public their own opposition.

Several brokerages said in notes to clients, however, that the deal was still likely to close.

“How Bristol responds to Wellington’s decision and whether other shareholders publicly voice their opinion on the deal in the coming days will likely determine the fate of the acquisition,” Credit Suisse’s Vamil Divan said in a note.

In the letter to employees, Bristol-Myers reiterated that the Celgene deal is the best path forward for the company and that it continued to believe strongly in the merits of the deal.

Bristol-Myers investors are due to vote on the deal at a special meeting scheduled for April 12.

Activist hedge fund Starboard Value LP, which filed a slate of nominees to challenge Bristol-Myers’ board last week, has also been canvassing shareholders seeking to oppose the deal.

“Even with the combined voting power for both Wellington and Starboard Value, we believe there continues to be a high hurdle for opposition to reach majority,” said Andy Hsieh, a William Blair analyst.

Sources have told Reuters that Dodge & Cox, Bristol-Myers’ fifth largest shareholder, is also unhappy with the deal.

Bristol and Celgene through the deal hope to create a market leader in the lucrative treatment of cancer through their combined portfolios.

“It’s clear Bristol and Celgene are going to need to get back on the road and sell this strategy more aggressively,” said Baird Research analyst Brian Skorney.

 

Reporting by Ankur Banerjee and Manas Mishra in Bengaluru; Editing by Saumyadeb Chakrabarty

 

Reuters source:

https://www.reuters.com/article/us-celgene-m-a-bristol-myers-wellington/celgene-slumps-as-bristol-myers-shareholder-resists-merger-idUSKCN1QH1K7