Summary
- Proposed deal deeply undervalues Celgene, and BMS admits it.
- Celgene’s pipeline is about to turn a corner with potentially 5 product launches in the next 2 years.
- Bristol-Myers Squibb has a poor and shallow pipeline and offers little in value to Celgene.
- Celgene shareholders should vote against the acquisition.
When Celgene (CELG) and Bristol-Myers Squibb (BMY) announced their mega-merger just days after the new year, it shocked the entire pharma world. Their deal, valued at $74 billion, would be the largest ever in pharma history and create a combined company that would be the 4th largest in the US. Recently, though, the success of this deal has been put into question. Activist investor Starboard Value has come out publicly and opposed the deal, calling it a “’bet the company’ acquisition” and “poorly conceived and ill-advised” in a letter to all BMS shareholders. It joins several other major BMS shareholders, including Wellington Management and Dodge & Cox, who want to block the proposed deal.
Since the merger announcement, the primary focus seems to be whether this is a good deal for BMS. And this is not without reason. Current BMS shareholders will be heavily diluted and be forced to take on not only $32 billion in new debt, but also $20 billion in assumed debt from Celgene. It also erases any chance of being BMS being acquired itself, a very real possibility considering rumors of a takeover have swirled since 2017. While these are real concerns, little debate has been raised over whether it is the right deal for Celgene. This article will argue that the acquisition offer is a bad deal for Celgene shareholders and the company is better independent than combined with Bristol-Myers Squibb.
