Celgene Corp. (CELG) - Get Report surged higher Friday after an influential shareholder advisory group recommend investors vote in favor of the cancer drug specialist's takeover by Bristol-Myers Squibb Co. (BMY) - Get Report , while a key activist dropped its opposition to the $74 billion deal.
Institutional Shareholder Services recommended the deal, which had been challenged by key Britsol-Myers shareholders Starboard Value and Wellington Management, ahead of an April 12 vote on the controversial takeover, which was first revealed in early January. Glass Lewis, another proxy service that provides advice to passive shareholders, echoed the ISS statement Friday as well, while Starboard said it would withdraw its proxy solicitation to vote against the tie-up
"Overall, the deal's strategic rationale is sound. The two companies have a complementary overlap in therapeutic focus, and the transaction diversifies BMY's revenue stream ... The transaction also significantly enhances BMY's pipeline, raising the number of late-stage drugs from one to six," ISS said. "Moreover, the combination could result in meaningful synergies - the certainty of which seems bolstered by the facts that the two companies have headquarters in New Jersey as well as overlapping R&D centers."
Bristol Myers shares closed down .27% on Friday to $47.71, following the ISS statement and Starboard statements, a move that would extend the stock's decline since the Celgene deal was first announced on Jan. 3 to around 9.5%.
Celgene shares closed up 7.88% to $94.34, a move that values the cancer drug specialist at around $67 billion.
Bristol-Myers offered Celgene investors one Bristol-Myers share and $50 in cash for each Celgene holding, as well as a special rights issue that will pay off if the merged group meets certain business targets, when it unveiled the deal on January 3.
The deal valued Celgene at $102.43 each at the time, a 53.7% premium to the previous session's closing price. The combined group -- which will be 69% owned by Bristol-Myers -- would have a portfolio with nine drugs that generate more than $1 billion in sales, the companies said.
Starboard had said Celgene faces a "massive patent cliff" that will force it to replace some 60% of its revenues over the next seven years. It also thinks Celgene's drug pipeline is "extremely risky" and says the takeover proposal was too hastily put together.
Wellington Management says that while it "agrees that Bristol-Myers should be active in business development that secures differentiated science and broadens the future revenue base", it doesn't think the Celgene transaction "is an attractive path towards accomplishing this goal."
"Since announcing the Celgene transaction on January 3, our Board and management team have had numerous conversations and meetings with our stockholders across our ownership base, including Wellington," Bristol Myers said in an emailed statement to TheStreet on Feb. 28. "We believe that we are acquiring Celgene at an attractive price, and that this transaction presents an important and unique opportunity to create sustainable value."