Bristol-Myers Squibb (NYSE: BMY) acquired its peer Celgene (NASDAQ: CELG) in a $74-billion cash-and-stock deal. Under the agreement terms, Celgene shareholders will receive 1 BMY share and $50 in cash for each share of Celgene. Shares of Celgene soared more than 30% in the pre-market trading hours on Thursday, while Bristol-Myers Squibb shares plunged about 13%.
Based on the closing price ($52.02) of Bristol-Myers Squibb stock on January 2, 2019, the cash and stock consideration to be received by Celgene shareholders is valued at $102.43 per share. In the combined entity, BMS shareholders will have 69% of the ownership and Celgene shareholders will have 31% of the ownership.
Celgene shareholders will also receive one tradeable Contingent Value Right (CVR) for each share of Celgene. This will entitle them to receive a payment if future regulatory milestones are achieved.
The combined specialty biopharma company will have leading franchises in the areas of oncology, inflammatory and immunologic disease, and cardiovascular disease. The combined company will have six expected near-term product launches.
The combination is expected to be more than 40% accretive to Bristol-Myers Squibb’s EPS on a standalone basis in the first full year following the close of the transaction. Bristol-Myers Squibb expects to realize run-rate cost synergies of approximately $2.5 billion by 2022 and more than $45 billion of free cash flow is expected to be generated over the first three full years post-closing.
“As a combined entity, we will enhance our leadership positions across our portfolio, including in cancer and immunology and inflammation. We will also benefit from an expanded early- and late-stage pipeline that includes six expected near-term product launches,” said Giovanni Caforio CEO of BMS.
“Combining with Bristol-Myers Squibb, we are delivering immediate and substantial value to Celgene shareholders and providing them meaningful participation in the long-term growth opportunities created by the combined company,” said Mark Alles, CEO of Celgene.
Celgene plunges to new 52-week low despite beating Q3 estimates
The transaction, which is expected to close in the third quarter of 2019, is subject to the approval of both companies’ shareholders and regulatory approvals.
When the transaction closes, Caforio will continue to serve as Chairman of the Board and CEO of the company. Two members from Celgene’s Board will be added to the Board of Directors of Bristol-Myers Squibb. The combined company will continue to have a strong presence throughout New Jersey.
In a separate press release, Bristol-Myers Squibb said that it expects full-year 2019 GAAP EPS is expected to be in the range of $3.75 to $3.85 and non-GAAP EPS is estimated to be in the range of $4.10 to $4.20. This outlook excludes the impact of Celgene acquisition. Bristol-Myers Squibb will report its fourth quarter 2018 results on January 24, 2019.
In the past one year, Bristol-Myers Squibb stock had dropped 15%, while shares of Celgene plunged 37%.