Matchmaker Seeks Drug Company: Must Have Pipeline, $85 Billion

(Bloomberg) -- As investor discontent simmers over Bristol-Myers Squibb Co.’s $74 billion takeover of Celgene Corp., the possibility of a surprise buyer swooping in with an offer for Bristol-Myers has lingered as a way of breaking up the transaction.

Speculation about an interloper increased this week after Wellington Management Co., one of Bristol-Myers’s top shareholders, said Wednesday it opposed the deal. On Thursday, activist investor Starboard Value said it will vote against the merger, and issued an open letter calling for the drugmaker to either stay independent -- or find a buyer.

But among analysts that have run through possible buyers for Bristol-Myers, there’s been one consistent question: Does any of the short list of giant drugmakers want to start a potentially hostile takeover bid for an $85 billion company?

“There’s a fair number of companies that could do a deal of this size -- the question is, would they want to,” said Timothy Anderson, an analyst with Wolfe Research. “Most have said they’re not willing to do a big acquisition. The odds are low.”

There are about a dozen drug and biotechnology companies bigger than Bristol-Myers, including AbbVie Inc., Pfizer Inc., Johnson & Johnson, Amgen Inc. But most have been clear in recent months that they’re not interested in acquisitions that big.

No Thanks

AbbVie Chief Executive Officer Richard Gonzalez told investors in January that the company doesn’t have an appetite for a deal “of that magnitude at all.” Pfizer CEO Albert Bourla said in January that the company isn’t interested in a “destructive deal” that would distract from pipeline efforts. Sanofi isn’t pursuing deals of that size, said CEO Olivier Brandicourt during an earnings call last month.

Amgen has left the door open to a large deal -- at least slightly. When asked in January if it was open to a major deal, CEO Robert Bradway said “we will continue to look across the waterfront of smaller and larger deals,” he said. The company declined to comment further.

A Bristol-Myers spokeswoman said Friday the company is confident the Celgene transaction will close, producing a leading drug company that will benefit stockholders.

The deal also has a $2.2 billion breakup fee that any buyer would likely have to pay. Shareholders for Bristol-Myers and Celgene are scheduled to vote on April 12 whether to approve the deal.

“Beyond the lack of realistic, potential alternatives that could collectively provide a similar level of upside, we continue to see strong rationale for the acquisition,” Geoff Meacham, an analyst with Barclays Plc, said in a note to clients this week.

Despite the lack of an obvious spoiler, there are still significant doubts among investors that the deal will close. The gap between Celgene’s share price and the about $100-per-share value of Bristol-Myers’ cash-and-stock offer is near a high since the deal was announced on Jan. 3.

Matchmaker Seeks Drug Company: Must Have Pipeline, $85 Billion

Bristol-Myers shares were up 2.7 percent to $53.05, their highest intraday price since Dec. 14, before the deal was announced. Celgene gained 2.3 percent to $85.06.

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