Bristol-Myers Squibb (BMY) said Thursday it would acquire Celgene (CELG) in a cash and stock transaction valued at about $74 billion.
Under the terms of the acquisition, Celgene shareholders will receive one share of Bristol-Myers Squibb and $50 in cash for each share they own. They also will receive one tradeable contingent value right for each share of Celgene they own, entitling them to a payment for the achievement of future regulatory milestones, Bristol-Myers Squibb said in a statement.
Both companies’ boards have approved the deal.
“The transaction will create a leading focused specialty biopharma company well positioned to address the needs of patients with cancer, inflammatory and immunologic disease and cardiovascular disease through high value innovative medicines and leading scientific capabilities,” the statement said. “With complementary areas of focus, the combined company will operate with global reach and scale, maintaining the speed and agility that is core to each company’s strategic approach.”
Based on Bristol-Myers’ closing price on Wednesday of $52.43 a share, Celgene shareholders would receive $102.43 a share and the CVR. Celgene closed at $66.64 a share on Wednesday.
Bristol-Myers shares fell 16% to $44.10 in pre-market trading Thursday while Celgene jumped 31% to $87.10 a share.
Upon completion of the transaction, Bristol-Myers Squibb shareholders are expected to own about 69% of the company, and Celgene shareholders will own the rest.
The companies said the mashup will create “leading oncology franchises in both solid tumors and hematologic malignancies led by Opdivo and Yervoy as well as Revlimid and Pomalyst; a top five immunology and inflammation franchise led by Orencia and Otezla; and the No. 1 cardiovascular franchise led by Eliquis.”
If approved, the new company will have nine products with more than a billion dollars in annual sales and “significant” growth potential in the fields of oncology, immunology and inflammation and cardiovascular disease, the statement said. Opportunities nearing launch represent about $15 billion in revenue potential.
The acquisition’s internal rate of return will easily top Bristol-Myers’ and Celgene’s cost of capital and is expected to be more than 40% accretive to Bristol-Myers Squibb’s per-share earnings on a standalone basis in the first year after the close of the transaction, the companies said.
Free cash flow in the first three full years after closing is pegged at more than $45 billion. Bristol-Myers expects run-rate synergies of about $2.5 billion by 2022 and the company “is confident it will achieve efficiencies across the organization while maintaining a strong, core commitment to innovation and delivering the value of the portfolio.”
The acquisition isn’t subject to financing conditions as the cash portion will be funded through cash on hand and debt financing that Bristol-Myers Squibb has obtained from Morgan Stanley Senior Funding and MUFG Bank.
Bristol-Myers Squibb also said it expects to execute an accelerated share repurchase program of up to about $5 billion, subject to the closing of the transaction, market conditions and board approval.