Wellington Management holds approximately 8% of Bristol-Myers Squibb’s stock and when it voiced its concerns over the potential largest deal in the industry’s history, it had an effect.
The share price of Celgene, at the time of writing, is down by 7.54%, while BMS’ is up by 1%.
Wellington suggested that it agreed with BMS’ efforts to be active in ‘business development’ to broaden its future revenue base, but disagreed that pursuing the Celgene transaction was the correct path to do so.
Wellington's reaction:
1) The transaction asks BMS shareholders to accept too much risk and the terms offer BMS shares to Celgene shareholders at a price well below implied asset value
2) Execution success could be more difficult to achieve than depicted by company management
3) Alternative paths to create value for BMS shareholders could be more attractive
The investment company was not the only shareholder that expressed concern over the deal, with Starboard Value also delivering an open letter to BMS suggesting the deal was ‘ill-advised’.
In further action, Starboard has recommended “a slate of director candidates” to be elected to ensure that the current board is held ‘accountable’.
Unlikely to deter deal
According to analysts, the unrest is worrying, if not altogether damning, for BMS prior to a shareholder meeting scheduled for April 12, 2019.
Barclays and Atlantic Equities both released reports suggesting that the shareholders’ misgivings were unlikely to derail the deal.
Analysts for Barclays stated, “While Wellington’s decision is likely to prompt other funds who remain unconvinced by the upside of the acquisition to identify themselves in the coming weeks, ultimately we still expect the majority shareholder to support the deal at the upcoming April 12 vote.”
For BMS’ part, it provided us with a statement, reading: “We believe that we are acquiring Celgene at an attractive price, and that this transaction presents an important and unique opportunity to create sustainable value.”
