Bristol-Myers Squibb CEO insists proposed Celgene purchase not a "defensive deal"

Bristol-Myers Squibb CEO Giovanni Caforio reiterated that the company's proposed $74-billion acquisition of Celgene is not designed to fend-off a takeover of the company. This "is not [a] defensive deal," Caforio said, as the drugmaker looks to persuade investors to support the transaction ahead of an April 12 vote.

Bristol-Myers Squibb has faced criticism from shareholders over the deal, with activist investor Starboard Value recently suggesting that the agreement was "hastily construed and perhaps done to thwart potential strategic interest" in the company. Bristol-Myers Squibb's largest shareholder Wellington Management has also said that it is "not supportive" of the Celgene deal, calling for the company to explore other options.

However, Caforio hit back at the criticism, explaining that while Bristol-Myers Squibb had talked with other companies about possible deals, none of those conversations progressed enough to lead to an actual offer. Caforio indicated that while he had discussions with other CEOs, those talks were at very high level and ended in 2017.

The executive's comments come as Starboard Value reportedly launched a probe to determine whether hedge funds are attempting to use "empty voting" to swing the upcoming vote in favour of approving the deal. Sources suggested that Starboard Value is investigating whether hedge funds including Third Point and D.E. Shaw purchased Bristol-Myers Squibb solely for the purpose of voting in favour of the transaction.

Commenting on the matter, Henry Hu, a professor at the University of Texas at Austin Law School, said "Third Point, if it is a [Bristol-Myers Squibb] shareholder, has voting rights, except there's a possibility a court might not count those votes if it decides Third Point is an 'empty voter' with negative economic ownership." Hu added "if Third Point has completely hedged out its economic interest in [Bristol-Myers Squibb], then Third Point would benefit from [Bristol-Myers Squibb] offering an overly generous price for Celgene shares even if it's not good from the standpoint of other [Bristol-Myers Squibb] shareholders."

For related analysis, see ViewPoints: Bristol-Myers Squibb and Celgene’s best laid plans start to unravel.

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