Without 'smoking gun,' BMS, Celgene deal will close as planned: analyst

Bristol-Myers Squibb and Celgene executives have been working hard to defend their $74 billion merger against dissident shareholders, and on Tuesday, the sides rolled out more arguments either for or against the deal. But despite staunch disagreement over the merits of the merger, at least one analyst still believes the deal will go through after a vote on April 12. 

Starboard Value published a 197-page presentation on Tuesday criticizing the proposed megamerger as "ill-advised" and hurried, arguing it could destroy shareholder value. But the investors didn’t present a "smoking gun," Jefferies analyst Michael Yee wrote in a note to clients, so the way he sees it, the deal is still likely to get support from advisers at Institutional Shareholder Services and go through. 

Blasting the deal, Starboard said Bristol executives seem to have rushed the talks out of a desire to "announce the acquisition by an arbitrary near-term deadline." Further, Starboard said the merger was negotiated with the "wrong intentions, as a defensive measure designed to protect Bristol-Myers from becoming an acquisition target itself."

Starboard isn't the only one that thinks the merger may have been designed to ward off unwanted BMS suitors. Wolfe Research's Tim Anderson wrote recently that he suspects the company's "actions are in fact partly designed to prevent itself from being acquired."

But BMS executives have their own arguments in favor of the deal, which they laid out in a Tuesday presentation. They once again stressed that the combined company would be the top player in oncology and cardiovascular diseases, plus a top-5 company in immunology and inflammation. It’d have nine products with over $1 billion in annual sales plus six near-term launches. BMS also said it went through a 6-month "deep-dive analysis" on Celgene’s opportunities and risks. 

BMS and Celgene unveiled their megamerger in early January, presenting numerous arguments about why the companies are better off together than separate. It took activist investors about a month and a half to go public with their opposition. Wellington Management—Bristol-Myers' largest shareholder—and Starboard came out against the proposal in late February.

Despite the pushback, Yee and other analysts have remained confident the deal will go through. After Wellington voiced its public opposition, Atlantic Equities analysts published a note tallying up potential "no" votes and found that the rebels likely didn't have enough to scrap the deal. 

Wellington has "investment discretion" over nearly 8% of BMS’ outstanding shares, but it has shared voting power over only 1.7% of them, the analysts wrote. Another investor group, Dodge & Cox, reportedly opposes the deal, but it holds just 2.6% of BMS shares, the analysts wrote. Starboard Value's voting power is even more limited, they said.

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