Bristol-Myers Squibb’s $74bn Acquisition of Celgene

By Jack Briody, Lorraine Jiang and Tristan Yang (Columbia University) - Date: 26/01/2019

Overview of the deal

  • Acquirer: Bristol-Myers Squibb

  • Acquirer Advisors: Morgan Stanley, Evercore, and Dyal Co.

  • Target: Celgene

  • Target Advisors: JP Morgan and Citi

  • Estimated value: $74bn - Announcement date: January 2, 2019

Bristol-Myers Squibb’s acquisition of Celgene will serve as an important catalyst in the biotech market. Despite recent struggles, with Bristol-Myers losing to fierce competition from its rival Merck & Co. and Celgene’s stock falling more than 41% last year, the combined company is expected to have nine products with more than $1 billion in annual sales and six expected near-term launches representing more than $15 billion in revenue potential.

Bristol-Myers Squibb is offering $50bn in cash in addition to a 1:1 exchange of shares, representing an addition of $32bn in fresh debt to Bristol-Myers Squibb’s balance sheet.

The acquisition is expected to boost Bristol Myers Squibb’s earnings per share by more than 40% while achieving approximately $2.5bn of expected run-rate cost synergies by 2022. Bristol-Myers Squibb’s shareholders will own approximately 69% of the combined company and Celgene holders 31%.

“Bristol’s acquisition of Celgene looks smart and could turn out to be a bargain price. (It may even light a fire under AbbVie Inc. or other rivals to go after deals of their own.) But most buyers in transactions this large haven’t been so lucky. Shares of a majority of the leading acquirers of the last few years have fallen since their deals were struck.” - Angelica LaVito & Berkeley Lovelace Jr., Bloomberg Business

Company details (Bristol-Myers Squibb Company)

Bristol-Myers Squibb is an American pharmaceutical company that researches, produces, markets, licenses, and internationally distributes biopharmaceutical products for cancer, HIV/AIDS, cardiovasculars, diabetes, hepatitis, immunoscience, rheumatoid arthritis, and psychiatrics.

- Founded in 1887, headquartered in New York, NY

- Chairman and CEO: Giovanni Caforio, M.D.

- Number of employees: 23,700

- Market Cap: $76.5bn - EV: $77.1bn

- LTM Revenue: $22.0bn - LTM EBITDA: $6.3bn

- LTM EV/Revenue: 3.5x - LTM EV/EBITDA: 12.2x

Company details (Celgene Corporation)

Celgene is a pharmaceuticals company that researches, develops, and sells biopharmaceuticals worldwide. Celgene holds a 24.81% market share and specializes in cancer therapeutics and inflammatory disorders.

- Founded in 1986, headquartered in Summit, New Jersey

- Chairman and CEO: Mark Alles

- Number of employees: 7,467

- Market Cap: $59.5bn - EV: $75.4bn

- LTM Revenue: $14.7bn - LTM EBITDA: $5.9bn

- LTM EV/Revenue: 5.1x - LTM EV/EBITDA: 12.8x

Projections and Assumptions

Short term consequences

The Bristol-Myers Squibb & Celgene acquisition will lead to the formation of one of the largest pharmaceutical and biotech giants in the world. It will also go down as the largest pharmaceutical merger to-date. This seems to be good news for Bristol-Myers Squibb, as many analysts have predicted that it would be the takeout target of a future acquisition.