Wellington Management Company To Vote Against BMY Merger

Celgene Corporation (CELG)’s stock falls after Wellington Management Company announced that it does not support Bristol-Myers Squibb Co (BMY)’s proposed acquisition.

Wellington Management Company

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Analysts Comment on Bristol-Myers Squibb - Celgene Corporation Deal

BofA Merrill Lynch

Wellington Management Company, an independent investment management firm, announced via 13-G and 13-D filings it does not support BMY’s acquisition of CELG. While it is unclear to us how Wellington’s position will affect the deal outcome, the Street now sees the possibility of the CELG acquisition being disrupted based on the widening deal spread in the after-market. Key unknowns: (1) Wellington’s voting power ‒ dispositive power [8% or 126m shares] vs. voting power [2% or 28m shares]; (2) will other large institutional shareholders join Wellington, potentially taking more of an activist posture toward the Celgene acquisition; (3) will other larger BMY holders with cross-ownership go against their economic self-interest and vote against the merger; and (4) could Wellington reach some sort of accord with BMY mgmt and ultimately support the transaction? We believe the BMY-CELG transaction remains the most probable outcome as a compelling alternative (bid for BMY) would likely be needed to block a majority vote needed by BMY shareholders on April 12.

Credit Suisse

After the close, Bristol's largest shareholder Wellington Management Company, which holds ~8% of BMY shares, announced that it is not supportive of the pending Celgene acquisition. The news is a surprise to us as we believe many investors have been warming up to the deal, with the stock slowly returning to the levels where it was trading prior to the announcement of the deal. Given the Wellington development, the key question will be how this impacts broader investor sentiment on the deal ahead of the April 12th shareholder vote. We spoke to Bristol IR briefly after the news broke, but there was not much they could say at this point. How Bristol responds to Wellington's decision and whether other shareholders publicly voice their opinion on the deal in the coming days will likely determine the fate of the acquisition. We also await the opinion of proxy advisory firms, but that is not expected until about 2 weeks prior to the vote.

BofA Merrill Lynch

BMY’s largest active shareholder Wellington Management Company announced that it is not supportive of the company’s proposed acquisition of CELG. Wellington believes that “alternative paths to create value” could be more attractive. Wellington’s 8% ownership of BMY adds weight to Starboard’s nomination of five BMY board seats and could mount a proxy fight. Of note, AMGN and Sanofi were reported by the media to have a potential interest in acquiring BMY. While we believe the BMY/CELG merger is still likely to take place, we see increased risk to the transaction ahead of the special shareholder meeting on April 12th.

Jefferies

The top shareholder of BMY Wellington Management Company (owns or may control around 8% of the stock) publicly announced it plans to vote against the planned acquisition of CELG, causing CELG stock to fall ~10% in after-hours trading.

In general we applaud shareholders speaking up against major transformative M&A if they do not agree w/ the target. However, it is unclear to us if other BMY shareholders who are still in the stock will follow suit although, given public reports and statements reported in the media, we believe it is possible at least one other long-term top 5 holder may disagree with the transaction too.

RBC Capital Markets

While it is hard to predict whether another company would acquire BMY (stopping the CELG merger), given the limited time for diligence and low number of bidders for CELG, which has a profile similar to BMY, we see this as also unlikely. CELG shares were off 10% postmarket as BMY's top shareholder, representing 8% of shares outstanding, voiced their opposition to the deal. While this could potentially enable an activist campaign, such as from Starboard (<0.1% shares OS), to gain more traction and additional shareholder support, our analysis showing that with the majority of BMY shareholders also owning CELG and therefore benefiting if the deal were to close rather than fall through, there is still a good likelihood that the 4/12 BMY shareholder vote will support the transaction.




About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver