BMS closes on Celgene merger after rebel investors bow out

Bristol-Myers Squibb chalked up a morale-boosting victory in its bid to close its $74bn merger with Celgene, after a rebel investment group abandoned a proxy vote against the deal.

Activist hedge fund Starboard Value had filed blue proxy materials to be voted on at BMS’ forthcoming annual general meeting on 12 April seeking to reject the deal, but said ahead of the weekend that it had withdrawn the proposal.

The move came after two influential shareholder advisory groups – Institutional Shareholder Services (ISS) and Glass Lewis & Co – recommended that investors vote in favour of the merger because “overall, the deal's strategic rationale is sound.”

ISS pointed to the two companies’ complementary therapeutic focus, the potential to diversify and enhance BMS’ pipeline, and the opportunity to deliver cost savings as “the two companies have headquarters in New Jersey as well as overlapping R&D centres.”

Glass Lewis meanwhile said 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.”

Starboard Value – which has a million-share stake in BMS that gives it around a 0.06% position – says it still intends to vote against the merger at the AGM, reiterating its position that the deal is risky and could destroy shareholder value, but there’s no question this is a major defeat.

“We…recognise that, despite the substantial swell of support against this transaction, it is extremely difficult for shareholders to prevail without a supportive recommendation from ISS and Glass Lewis to vote against the transaction,” said the fund.

“We are extremely disappointed by the conclusions reached by the proxy voting advisory firms,” it added, but insisted that “If shareholders want to protect and save Bristol-Myers, they can still vote against the company’s proposed acquisition of Celgene on the company’s white proxy card.”

Wellington Management, a major shareholder which owns around 7.7% of BMS’ stock, has also come out in opposition to the deal but at the time of writing had not updated its position in light of the ISS and Glass Lewis statement.

Both shareholders have said they are concerned about Celgene’s reliance on blood cancer drug Revlimid (lenalidomide), which accounts for almost two-thirds of the company’s sales and is due to go off-patent within the next few years.

Shares in BMS tracked down 0.27% on Friday after Starboard pulled its proxy, while Celgene was up almost 8%.

Much of the latter’s gain however likely came on the back of news that Celgene had settled litigation with Alvogen over patents to Revlimid and scored recommendation for approval in the EU for the drug and follow-up Imnovid (pomalidomide) in triplet combinations for multiple myeloma.

Analyst Matt Phipps at William Blair said he though shareholders would back the deal on 12 April and that it would close in the third quarter of this year.

BMS welcomed ISS and Glass Lewis’ conclusions, saying in a statement that “Celgene’s strategic fit, compelling value proposition, and strong pipeline make this the ideal combination.”

It went on: “The combined company will be stronger today, and better positioned for sustainable long-term growth, with six expected near-term product launches, strong commercialisation capabilities, and a deep and broad early-stage pipeline that will position the combined company for sustained leadership.”