Bristol-Myers Squibb, Celgene $74B deal under fire from investors

A $74 billion merger between Bristol-Myers Squibb and Celgene is under increasing pressure as investors look to sink the largest biopharmaceutical transaction in history.

Wellington Management Co. -- which holds a roughly 8 percent stake in Bristol-Myers Squibb -- came out against the deal late Wednesday and said the company was asking shareholders to shoulder too much risk. Boston-based Wellington was previously the largest investor in Bristol-Myers, but recently reduced its stake and now only holds voting power for a fraction of shares.

“Bristol-Myers should be active in business development that secures differentiated science and broadens the future revenue base,” the firm said. "Wellington does not believe that the Celgene transaction is an attractive path towards accomplishing this goal.”

And on Thursday, Starboard Value LP also announced its own opposition, increasing the pressure on other investors to take a side ahead of a April 12 vote. 

"We strongly believe that the proposed deal is not in the best interest of shareholders. This view has been solidified by the numerous other large, long-term shareholders who appear to likewise believe this deal is not in the best interest of shareholders," the activist firm wrote.

Starboard owns a relatively small portion of shares in Bristol-Myers, but is considering purchasing more.

Celgene shares closed down over 8.5 percent, while Bristol-Myers' stock rose slightly.

There are questions of whether Dodge & Cox, the fifth-largest shareholder at the drugmaker, will also oppose the deal. A representative for the firm could not immediately respond to request for comment.

In a statement, Bristol-Myers said it has had “numerous conversations and meetings with our stockholders across our ownership base, including Wellington.”

“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,” the firm said.

The deal between Celgene and Bristol-Myers would combine two of the largest producers of cancer drugs, though both are struggling with their existing development pipelines. Bristol-Myers in particular has lost ground to rival Merck, while Celgene is slated to lose exclusivity on its marquee drug Revlimid in 2022.

Among the more attractive aspects of the merger, Celgene is developing a so-called gene therapy treatment – which uses healthy genes to combat diseases – for non-Hodgkin lymphoma.

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The deal includes a $2.2 billion breakup fee, according to federal disclosures, but analysts are still bullish that the transaction will proceed.

“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,” analysts at Barclays wrote.