- The proposed mega-deal between Bristol-Myers Squibb and Celgene took a significant step toward completion Friday, when the two leading Wall Street proxy advisory firms both recommended Bristol-Myers shareholders support the deal.
- Two of Bristol-Myers top institutional investors have opposed the transaction, throwing what would rank among the industry's largest deals into some doubt. Yet with Institutional Shareholder Services (ISS) and Glass Lewis now backing Bristol-Myers management, prospects for a favorable shareholder vote on April 12 appear more favorable.
- Wall Street had mixed reactions to the news, with shares in Celgene shooting up by about 8% Friday morning and shares of Bristol-Myers down nearly 3%.
The potentially $74 billion deal, first announced in January, has been met with skepticism from several key voices over the past couple months.
Wellington Management and Dodge & Cox, both institutional investors in Bristol-Myers, have come out against the merger, which Glass Lewis noted is the first time it can recall two of a company's top-five shareholders opposing a transaction of this size.
And Starboard Value, one of the most vocal activist investors, waged a public campaign to scuttle the deal throughout March. On Friday, however, Starboard decided to withdraw its proxy solicitation to vote against the deal, ceding to the influence of ISS and Glass Lewis.
ISS and Glass Lewis ranks as Wall Street's largest advisory firms and hold significant influence over how institutional investors decide to vote on shareholder proposals.
Glass Lewis' report to Bristol-Myers shareholders directly addressed uneasiness with the deal, acknowledging shareholder concerns that Bristol-Myers will overpay for Celgene's experimental drugs and disappointment the deal diminishes the chances of Bristol-Myers being itself acquired.
"Alas, they instead find themselves as large shareholders in the acquirer issuing a substantial number of shares at a depressed valuation to buy even cheaper, more out-of-favor stock that they purposefully didn't invest in," the firm stated. "There are also governance and process concerns that are hard to look past, especially for investors."
But, the advisory firm still recommended voting for the proposal despite those risks. "We find the proposed merger both strategically and financially compelling, structured in a reasonable manner from a valuation standpoint for Bristol-Myers shareholders," Glass Lewis wrote.
The ISS report generally echoed its counterpart, saying "the deal's strategic rationale is sound," arguing it will boost Bristol's pipeline and diversify its revenue.
"Both companies' current products and their pipelines are focused on drugs that fight cancer and blood disorders," ISS stated. "As such, the merger appears logical strategically, and likely to generate more synergies than one involving disparate pharmacological areas of focus."
In a Friday statement, Bristol urged shareholders to follow these recommendations. The critical vote is scheduled for April 12 at Bristol's annual shareholder meeting. The two companies expect the deal to close in the third quarter of 2019.