Question

Evaluate and provide two (2) main reasons with evidence which cause the failure/success of the merger and acquisition.

by using this article "Bristol-Myers Squibb’s $74 billion acquisition of Celgene would combine two troubled companies"

Answer 1

POSSIBLE REASONS FOR FAILURE OF MERGER (bristol myers and celgene)

1. SHAREHOLDER CONSENT

Many investors could be unhappy because this deal values Celgene below where it was trading between 2015 and 2018. But it's not Celgene investors who are balking. Instead, it's Bristol-Myers Squibb shareholders rallying for this merger to fall apart.

The biggest opponent is Boston-based Wellington, a money manager with $1 trillion in assets under management and a 7.7% stake in Bristol-Myers Squibb. In a statement, Wellington said it opposes the tie-up because:

• The transaction asks BMY shareholders to accept too much risk, and the terms offer BMY shares to CELG shareholders at a price well below implied asset value;
• Execution success could be more difficult to achieve than depicted by company management; and
• Alternative paths to create value for BMY shareholders could be more attractive.

Wellington's not alone. Bristol-Myers' fifth-largest shareholder, Dodge & Cox, isn't pleased, either, according to Reuters. Also, Starboard Value, an activist investor, plans to vote its 1 million shares against the merger when votes are tallied on April 12. Not only does Starboard Value believe the merger is "ill advised," it's advocating for Bristol-Myers Squibb to scuttle the deal and put itself up for sale instead. In a letter to Bristol-Myers' board and investors, it went as far as to suggest that the merger was "hastily construed' to potentially thwart advances from a suitor.

2. DEAL VALUATION

If more Bristol-Myers shareholders side with Wellington, then this merger could fall apart. If it does, then Celgene's shares could tumble and Bristol-Myers shares could rise on hopes it will wind up becoming an acquisition target.

Any dip in Celgene shares, however, could be short-lived. Celgene has a slate of market-moving news coming, including its refiling of ozanimod for approval and results from its liso-cel and bb2121 trials.

If the deal does go off without a hitch, then it wouldn't necessarily be bad news. Celgene's currently trading about 13% below the buyout price based on Bristol-Myers' current share price, and that doesn't include the potential $9 per share payout from the CVR. For this reason, a good argument can be made for owning Celgene regardless of how Bristol-Myers' investors vote in April.