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 The announcement strengthens the hand of activist hedge fund
Starboard Value LP, which filed a slate of nominees to challenge
Bristol-Myers' board last week, and has been canvassing its
shareholders seeking to oppose the deal.
Boston-based Wellington Management rarely makes its views public.
Its displeasure with the deal could embolden other shareholders to
come forward.
The development fueled uncertainty among investors over the
cash-and-stock deal's prospects. Celgene shares fell 8.5 percent in
after-hours trading following Wellington's statement, while
Bristol-Myers shares rose 3 percent. The spread between Celgene's
share price and the value of Bristol's bid nearly doubled to around
20 percent.
Wellington Management, which owns about 8 percent of Bristol-Myers
shares, said it found the Celgene deal to be too risky and
expensive. It said other options to create value for shareholders
"could be more attractive."
Dodge & Cox, Bristol-Myers' fifth largest shareholder is also
unhappy with the deal, sources have told Reuters.
Bristol-Myers said in a statement that its board and management have
had "numerous conversations and meetings" with investors, including
Wellington, since announcing the Celgene deal. "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," Bristol-Myers said.
Celgene and Starboard declined to comment. Dodge & Cox sources did
not immediately respond to requests for comment.
Unlike Wellington, many Bristol-Myers shareholders also have
significant stakes in Celgene. This overlap could boost support for
the deal, because Bristol-Myers shareholders will be less concerned
about the company overpaying if the acquisition target, Celgene, is
also owned by them.
"We continue to think the deal makes sense for Bristol-Myers, and
ultimately will go through, despite this new risk, but have to
acknowledge that Wellington has a much more commanding position than
anyone else who has taken a stance against the deal so far," Baird
Research analysts said in a note.
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Bristol-Myers would need to issue a significant number of new shares
to pay for Celgene, and as a result Bristol-Myers investors are
granted a vote on the deal. They will get to cast it at a special
meeting scheduled for April 12. Were they to shoot down the deal,
Bristol-Myers would have to pay Celgene a $2.2 billion breakup fee.
Bristol-Myers said in January that it would buy New Jersey-based
Celgene, combining two of the world's largest cancer therapy
businesses. Both companies are facing significant challenges in the
development and commercialization of their drug portfolios.
If the deal were to fall apart it would be a major setback for
Bristol-Myers Chief Executive Giovanni Caforio at a time when the
company's most important cancer immunotherapy and growth driver,
Opdivo, has fallen behind both in sales and development to Keytruda,
a rival drug from Merck & Co.
Celgene has had its own clinical setbacks, losing more than half its
market value between October 2017 and last month when the deal was
announced. An expensive experimental Crohn's disease drug touted as
a future multibillion-dollar product failed, and Celgene's expected
approval of high-profile multiple sclerosis drug ozanimod was
delayed.
In addition, revenue from Celgene's flagship multiple myeloma drug,
Revlimid, which brought in nearly $10 billion last year, is set to
start dropping in 2022 when it loses its U.S. exclusivity.
(Reporting by Michael Erman and Svea Herbst-Bayliss in New York;
Additional reporting by Ankur Banerjee in Bengaluru; Editing by
Sriraj Kalluvila, Bill Berkrot and Richard Chang)
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