Starboard Ends Proxy Fight at Bristol-Myers Ahead of Vote

(Bloomberg) -- Activist investor Starboard Value will call off its proxy fight to block Bristol-Myers Squibb Co.’s $71 billion takeover of Celgene Corp. after two prominent shareholder advisory firms urged investors to support the deal.

The New York hedge fund, which is run by Jeff Smith, said it was "extremely disappointed" both Institutional Shareholder Services Inc. and Glass Lewis & Co. issued reports in support of the deal Friday. Starboard said in a statement that it continued to believe the transaction was not in the the best interest of Bristol-Myers’ shareholders and planned to vote against the deal.

"We also recognize that, despite the substantial swell of support against this transaction, it is extremely difficult for shareholders to prevail without a supportive recommendation from ISS and Glass Lewis," the firm said. "Therefore, Starboard has decided to withdraw its proxy solicitation to vote against the Celgene transaction."

It noted shareholders could still vote against the deal on the company’s proxy card.

Celgene shares jumped Friday after ISS and Glass Lewis issued reports that urged investors to vote for the deal. ISS said that the proposed transaction has “sound strategic rationale and the valuation appears reasonable,” while Glass Lewis said it was strategically and financially compelling.

“Considering the company’s current situation and the lack of assuredly superior alternatives given the risk inherent to all paths of drug development, support for this transaction is warranted,” ISS said in its report Friday.

Celgene shares rose as much as 8.3 percent and were trading up 7.4 percent at $93.95 each at 12:37 p.m. Bristol-Myers fell 1.1 percent to $47.31.

Bristol-Myers said in a statement that it was pleased ISS and Glass Lewis share its belief that a combination with Celgene is in the best interests of the company and its shareholders. It continued to urge investors to support the deal at an upcoming shareholder meeting on April 12.

Bristol-Myers on Jan. 3 announced the blockbuster deal to acquire Celgene in a cash-and-stock transaction, saying the maker of the blood-cancer therapy Revlimid would add value to the company and bolster its pipeline of new medications.

Starboard had come against the acquisition last month, arguing it wasn’t in the best interest of investors because Celgene will face a significant decline in sales once its Revlimid patent expires.

Starboard has also said it believes that Bristol-Myers would be better off as a standalone entity.

Starboard, which has not disclosed the size of its stake in Bristol-Myers, has also nominated four directors to the company’s board, and did not say Friday whether it planned to put forth a slate of directors at the company’s annual general meeting later this year.

The deal diversifies Bristol-Myers’s late-stage pipeline and reduces its reliance on it top drug Opdivo, ISS wrote in the report.

“We ultimately believe this transaction is more likely than not to deliver for Bristol-Myers shareholders as a whole, in terms of several strategic and financial benefits,” Glass Lewis said.

To contact the reporters on this story: Scott Deveau in New York at sdeveau2@bloomberg.net;Joshua Fineman in New York at jfineman@bloomberg.net

To contact the editors responsible for this story: Elizabeth Fournier at efournier5@bloomberg.net, Timothy Annett

©2019 Bloomberg L.P.