Starboard Gives Way On Bristol Purchase -- WSJ

By Cara Lombardo 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (March 30, 2019).

Hedge fund Starboard Value LP dropped its fight to break up the year's biggest deal so far -- Bristol-Myers Squibb Co.'s $74 billion acquisition of rival drugmaker Celgene Corp. -- after two influential proxy-advisory firms recommended shareholders approve it.

The activist investor, who had argued the deal was too risky and done as a defensive move, said Friday it wouldn't actively solicit votes against the transaction ahead of a shareholder vote next month. Starboard noted that despite "the substantial swell" of opposition to the deal, it is unlikely to get voted down given the support from proxy advisers Institutional Shareholders Services Inc. and Glass Lewis & Co.

Bristol-Myers said in a statement Friday that it is pleased with the proxy advisers' decisions. It didn't address Starboard's ending its campaign.

Bristol-Myers and Celgene announced their proposed cash-and-stock combination Jan. 3, touting the benefits of combining two major sellers of cancer drugs. They said a merged company would have nine products with more than $1 billion each in annual sales and a pipeline that includes several near-term product launches.

ISS and Glass Lewis said in reports issued Friday that the deal appears to be in the interest of Bristol-Myers shareholders because it replenishes the pharmaceutical company's late-stage drug pipeline and diversifies its offerings.

In a surprise move late last month, the normally reserved Boston-based investment firm Wellington Management Co. publicly opposed the deal, arguing it could be difficult to execute and offers Bristol shares too cheaply to Celgene. Wellington has a stake of 7.2% in Bristol-Myers, according to FactSet, but doesn't control the votes on most of those shares.

Other large institutional shareholders -- such as BlackRock Inc., which holds a 4.7% stake, according to FactSet -- were seen as less likely to vote against the deal because they hold significant positions in both Bristol-Myers and Celgene.

Bristol-Myers shareholders are set to vote on the takeover April 12, with approval requiring a majority of votes cast. Starboard, which holds a stake of less than 1%, according to FactSet, said it still plans to vote against the transaction and urged others to do the same.

In a sign that investors expect the deal to close, Bristol-Myers shares were down 1.3% in afternoon trading, while Celgene shares gained roughly 7.5%.

Starboard had earlier this year nominated five potential directors, including its chief executive, Jeffrey Smith, to join the Bristol-Myers board. It wasn't immediately clear whether Starboard also pulled those nominations, which wouldn't be voted on until Bristol-Myers's annual meeting later this year.

Starboard has been one of the busiest activists so far this year, but it doesn't normally target companies as big as Bristol-Myers. Last month, Mr. Smith took over as Papa John's International Inc.'s chairman, and earlier Friday Magellan Health Inc. announced a settlement agreement with Starboard giving the hedge fund board seats.

--Maria Armental contributed to this article.

Write to Cara Lombardo at [e-mail]

(END) Dow Jones Newswires

March 30, 2019 02:47 ET (06:47 GMT)

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