BMY Bristol Myers Squibb Co

By Cara Lombardo and Micah Maidenberg 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (February 21, 2019).

Activist investor Starboard Value LP is unhappy with Bristol-Myers Squibb Co.'s deal to buy rival Celgene Corp., and it has moved to install its own set of directors at Bristol-Myers.

The hedge fund has nominated five potential directors, including its chief executive, Jeffrey Smith, and has been meeting with the drugmaker's executives, Bristol-Myers said in a filing Wednesday.

The activist proposal comes as Bristol-Myers has a deal in place to buy Celgene that was valued at $74 billion when it was announced earlier this year. It isn't clear why Starboard nominated the slate, though the hedge fund is unhappy with the deal, according to people familiar with the matter.

Activists don't always nominate board members when opposing a deal. The fact that Starboard did could indicate it has ideas for alternatives it would hope to implement, one of the people said. But analysts have said it is unlikely an activist could compel another company to make a bid for Bristol-Myers itself, partly because there aren't many potential suitors.

Bristol-Myers told Starboard it would review Starboard's proposal for the board, and the company and activist have met on multiple occasions, according to the filing.

Starboard in those meetings has asked the company to help it understand the rationale of the deal and hasn't expressed an opinion on it, another person familiar with the matter said. It has also indicated to the company that it isn't sure of its plans, this person said.

Successfully challenging the deal could be a long shot for Starboard by itself. The hedge fund has acquired about one million shares in the company, Bristol-Myers said, a sliver of its roughly 1.6 billion shares outstanding. Bristol-Myers indicated in the filing that Starboard, which bought the bulk of its stake Jan. 31, could also be planning to buy more stock.

Bristol-Myers shareholders are set to vote on the deal with Celgene on April 12, and a majority of the shares voted need to approve the deal for it to pass.

Should Starboard be looking to challenge the deal, it would need to garner significant support from other shareholders given its relatively small position. A handful of other shareholders are unhappy with the deal, including the fifth-largest shareholder, Dodge & Cox, according to the people familiar with the matter. But that doesn't necessarily mean they will vote against it.

Shareholders who own Bristol-Myers shares as of March 1 will be permitted to vote, meaning there is still a window for investors opposed to the deal to buy shares to vote against it.

Bristol-Myers and Celgene announced their proposed combination on Jan. 3, touting the benefits of combining two major sellers of cancer drugs. The deal is expected to be completed in the third quarter this year. Bristol-Myers shareholders were cool on the deal when it was announced, driving the company's stock down 14%, though it has been climbing in recent weeks.

Starboard has agitated for change at a range of companies, including Dollar Tree Inc., semiconductor company Mellanox Technologies and Cars.com, though it is rare for Starboard to target a company as large as Bristol-Myers, which has a roughly $84 billion market value.

Shares of Bristol-Myers closed down 0.12% at $51.30 Wednesday, while Celgene shares fell 0.32% to $90.40.

Write to Cara Lombardo at cara.lombardo@wsj.com and Micah Maidenberg at micah.maidenberg@wsj.com

(END) Dow Jones Newswires

February 21, 2019 02:47 ET (07:47 GMT)

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