Starboard Backs Away from BMS-Celgene Bust-up

Activist investor Starboard Value has backed away from plans to torpedo the proposed $74 billion merger of Bristol-Myers Squibb with Celgene after independent proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis recommended that BMS shareholders vote in favor of the deal.

Starboard said it would stop soliciting the shareholders to vote against it, blaming the proxy advisors for thwarting its campaign.

In a statement, ISS and Glass Lewis said the deal’s rationale is sound, adding that the two companies have a complementary overlap in therapeutic focus, and the transaction diversifies BMS’s revenue stream.

Additionally, ISS said the transaction also “significantly enhances” the BMS pipeline, raising the number of late-stage drugs from one to six. Moreover, the combination could result in “meaningful synergies,” as the two companies both are headquartered in the US state of New Jersey and have overlapping R&D centers.

Both companies are focused on drugs that fight cancer and blood disorders, which ISS said “makes the merger appear logical strategically and likely to generate more synergies than one involving disparate pharmacological areas of focus.”

Bristol-Myers Squibb and Celgene now expect the transaction to close in this year’s third quarter, as originally planned, subject to approval shareholders of both companies and the satisfaction of customary closing conditions and regulatory approvals.

A BMS special meeting scheduled for Apr. 12 is due to vote on matters relating to the proposed merger.

The battle between Starboard and the drugs major began at the end of January, when the activist investor bought 1 million shares in BMS and began arguing against the merger, saying in particular that Celgene had patent issues and there were better options for creating value.

Analysts have never given Starboard’s plan much of a chance of succeeding, and with the investor out of the picture most said they believe most shareholders would accept the ISS recommendations.

The hedge fund said it intends to vote against the merger, as it is a bad deal for shareholders that carries too much risk.

When announcing in early January that the merger plans had been sealed, BMS said the cash-and-stock transaction valued the US biotech at around $90 billion, including debt, and financial data company Refinitiv said it would be the largest healthcare deal on record.

By its own account, the merged group will have nine products with more than $1 billion in sales and near-term launch opportunities with revenue potential of more than $15 billion.