Does Bristol-Myers have a plan B if activists scuttle its Celgene buy?

Bristol-Myers Squibb
Starboard Value is working to amass "no" votes for Bristol-Myers Squibb's $74 billion Celgene deal. (Bristol-Myers Squibb)

What’s Bristol-Myers Squibb’s Plan B if its Celgene deal falls through? BMS won’t say whether it has one at all. And the company may be more likely to need a backup plan than some industry-watchers think.

As Wolfe Research’s Tim Anderson pointed out in a note to clients, the company has so far skirted questions about how it would proceed without the $74 billion takeout, saying only that “their focus is on getting the Celgene deal done.”

“They gave no insights on the path forward under this alternative scenario,” Anderson wrote, noting that if the deal doesn’t happen, Bristol’s past “string-of-pearls” strategy, which focused on small acquisitions, may not be enough to take it into the future.

And the way he sees it, it might be time to think about alternatives. Activist investor Starboard Value has already started working to take down the merger, and top shareholder Wellington Management has come out against it, too.

Anderson and his colleagues are hearing from other investors that “there continues to be uneasiness about the merits of the transaction and what the combined company will be capable of delivering to shareholders.”

RELATED: Activist Starboard steps up revolt on Bristol-Celgene merger—and BMS strikes back

Other analysts, though, have said they still expect the deal to close as planned.

“Wellington, even combined with similarly positioned funds, lacks the votes to sway the deal outcome,” Atlantic Equities analysts wrote recently. And Starboard’s stake is even smaller.

Meanwhile, though BMS may not be focusing on different endings to the Celgene story, other biopharma companies might be. Anderson—who has long contended that Bristol’s I-O struggles could make it a takeout target—suspects that its "actions are in fact partly designed to prevent itself from being acquired.”

RELATED: Can BMS rebels scuttle its Celgene buy? Analysts do the math—and so far, the votes don't add up

“Management stopped short of saying whether there has been any informal indication of interest in BMS by another party, which still leaves open a possible motive for the transaction,” he wrote, adding that “whether there was informal interest recently, or whether [the company] is merely anticipating this as a future risk, is not clear.”

Also unclear? Which company could—and would—swallow a drugmaker of Bristol's size. Many of the best-equipped companies, including Pfizer and AbbVie, have come out against megadeals in recent weeks. 

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