January 28, 2019 | Health Care | North America | Ended

Celgene / Bristol-Myers Squibb: Buyers for BMS, Merger Agreement Strength, Antitrust and Activism

We expect Celgene / Bristol-Myers Squibb (BMS) to be a core position for nearly every risk arbitrage fund in 2019. Although the knee-jerk selling in BMS by unconvinced market participants has subsided, the spread remains wide as event funds have somewhat held back, realising that they cannot meaningfully impact and contract the spread of this $61bn target. In this note, we explore the elephant in the room – an unsolicited bid for BMS pitched at a high enough premium to cause the merger to lapse. We also discuss the impact of Celgene’s patent litigations and a failed pipeline drug’s ability to test the permitted settlements and MAC provisions, respectively, antitrust hurdles and potential activist actions. Finally, we analyse precedent tradable CVRs, and the timetables and approval likelihood of each component that makes up the Celgene CVR.

Contents 1. Buyers of Bristol-Myers Squibb? The Numbers and Logic for Multiple Suitors 2. Abilities to Enforce “Company Permitted Settlements” and the MAC 3. Antitrust: Timing, Overlaps and Likely Divestitures Needed 4. Potential for Activist Intervention and Shareholder Vote Considerations 5. CVR Details, Timing and Precedent Trading Statistics 6. Break Price Analysis 7. Risk Arbitrage Trading Strategies 8. Deal Structure (60 pages)

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