Bristol-Myers Squibb looks to swallow Celgene

JANUARY IS a good time to go looking for a bargain, and Giovanni Caforio, chief executive of Bristol-Myers Squibb (BMS), has gone shopping. On January 3rd he announced his firm’s intention to buy Celgene, a slightly smaller American biotech company that has seen its share price fall by 57% since the autumn of 2017. Even though it is cheap, the company is a huge purchase for BMS, whose original constituent firm, Squibb, was founded in 1858. Its cash and stock offer values Celgene at roughly $90bn, including debt. If approved by regulators and by shareholders, the deal would be one of the largest-ever mergers in the pharmaceutical industry.

Winning over Celgene’s shareholders, who will be able to recoup some of their losses, should be fairly easy. BMS’s takeover offer, of $50 in cash plus a share in the combined entity, values Celgene at $102 per share, a 54% premium to the closing price on January 2nd. There is a sweetener, too. Celgene shareholders would also get a security called a “contingent value right”, which entitles them to more money if the company achieves certain milestones over time. These securities are sometimes used when volatile companies are being acquired and when a price is hard to agree on. The extra cash for BMS shareholders, of $9 a share, will be triggered if America’s drug regulator, the Food and Drug Administration (FDA), approves three of Celgene’s pipeline drugs by a certain date.