Question

Consider a past M&A deal. Provide a link to information about the deal (news article, Wikipedia link, etc). Tell us who the acquirer and target were and the year the acquisition was completed. What do you think the acquirer's strategy was in acquiring this target? Explain your reasoning.

Answer 1

Links for information are as follows:

https://en.wikipedia.org/wiki/Celgene#Acquisition_by_Bristol-Myers_Squibb

https://www.wikiwand.com/en/Bristol_Myers_Squibb

https://news.bms.com/news/corporate-financial/2019/Bristol-Myers-Squibb-Completes-Acquisition-of-Celgene-Creating-a-Leading-Biopharma-Company/default.aspx

Bristol-Myers Squibb Company + Celgene Corporation M&A Deal

Bristol-Myers Squibb Company (Acquirer) and Celgene Corporation (Target) entered into a definitive merger agreement under which Bristol-Myers Squibb will acquire Celgene in a cash and stock transaction with an equity value of approximately $74 billion. Under the terms of the agreement, Celgene shareholders will receive 1.0 Bristol-Myers Squibb share and $50.00 in cash for each share of Celgene. Celgene shareholders will also receive one tradeable Contingent Value Right (CVR) for each share of Celgene, which will entitle the holder to receive a payment for the achievement of future regulatory milestones. The Boards of Directors of both companies have approved the combination.

The transaction will create a leading focused specialty biopharma company well-positioned to address the needs of patients with cancer, inflammatory and immunologic disease, and cardiovascular disease through high-value innovative medicines and leading scientific capabilities. With complementary areas of focus, the combined company will operate with global reach and scale, maintaining the speed and agility that is core to each company’s strategic approach.

Based on the closing price of Bristol-Myers Squibb stock of $52.43 on January 2, 2019, the cash and stock consideration to be received by Celgene shareholders at closing is valued at $102.43 per Celgene share and one CVR (as described below). When completed, Bristol-Myers Squibb shareholders are expected to own approximately 69 percent of the company, and Celgene shareholders are expected to own approximately 31 percent.

Compelling Strategic Benefits

• Leading franchises with complementary product portfolios provide enhanced scale and balance. The combination creates:
  • Leading oncology franchises in both solid tumors and hematologic malignancies led by Opdivo and Yervoy as well as Revlimid and Pomalyst;
  • A top-five immunology and inflammation franchise led by Orencia and Otezla; and
  • The #1 cardiovascular franchise led by Eliquis.

The combined company will have nine products with more than $1 billion in annual sales and significant potential for growth in the core disease areas of oncology, immunology, and inflammation and cardiovascular disease.

• Near-term launch opportunities representing greater than $15 billion in revenue potential. The combined company will have six expected near-term product launches:
  • Two in immunology and inflammation, TYK2 and ozanimod; and
  • Four in hematology, luspatercept, liso-cel (JCAR017), bb2121, and fedratinib.

These launches leverage the combined commercial capabilities of the two companies and will broaden and enhance Bristol-Myers Squibb’s market position with innovative and differentiated products. This is in addition to a significant number of lifecycle management registrational readouts expected in Immuno-Oncology (IO).

• The early-stage pipeline builds a sustainable platform for growth. The combined company will have a deep and diverse early-stage pipeline across solid tumors and hematologic malignancies, immunology and inflammation, cardiovascular disease, and fibrotic disease leveraging combined strengths in innovation. The early-stage pipeline includes 50 high potential assets, many with important data readouts in the near-term. With a significantly enhanced early-stage pipeline, Bristol-Myers Squibb will be well-positioned for long-term growth and significant value creation.

• Powerful combined discovery capabilities with world-class expertise in a broad range of modalities. Together, the Company will have expanded innovation capabilities in small molecule design, biologics/synthetic biologics, protein homeostasis, antibody engineering, and cell therapy. Furthermore, strong external partnerships provide access to additional modalities.

Compelling Financial Benefits

• Strong returns and significant immediate EPS accretion. The transaction’s internal rate of return is expected to be well in excess of Celgene’s and Bristol-Myers Squibb’s cost of capital. The combination is expected to be more than 40 percent accretive to Bristol-Myers Squibb’s EPS on a standalone basis in the first full year following the close of the transaction.
• Strong balance sheet and cash flow generation to enable significant investment in innovation. With more than $45 billion of expected free cash flow generation over the first three full years post-closing, the Company is committed to maintaining strong investment-grade credit ratings while continuing its dividend policy for the benefit of Bristol-Myers Squibb and Celgene shareholders. Bristol-Myers Squibb will also have the significant financial flexibility to realize the full potential of the enhanced late- and early-stage pipeline.
• Meaningful cost synergies. Bristol-Myers Squibb expects to realize run-rate cost synergies of approximately $2.5 billion by 2022. Bristol-Myers Squibb is confident it will achieve efficiencies across the organization while maintaining a strong, core commitment to innovation and delivering the value of the portfolio.

The transaction is subject to approval by Bristol-Myers Squibb and Celgene shareholders and the satisfaction of customary closing conditions and regulatory approvals. Bristol-Myers Squibb and Celgene expect to complete the transaction in the third quarter of 2019.