In the first big pharmaceutical deal of the new year, New York-based pharmaceutical giant Bristol-Myers Squibb Co. (BMY, Financial) announced on Thursday morning it is buying Celgene Corp. (CELG, Financial) for approximately $74 billion.
According to the terms of the cash-and-stock deal, shareholders of the Summit, New Jersey-based biotechnology company will receive $50 in cash and one Bristol-Myers share for each share of Celgene they own. With a total value of $102.43 per share, the offer is a 53.7% premium to the stock’s closing price on Wednesday. Shareholders will also receive one Contingent Value Right for each share owned, which will allow them to be paid when regulatory milestones are reached.
In a statement, Bristol-Myers Squibb Chairman and CEO Giovanni Caforio said the union of the two entities will create a specialty biopharma company focused on treatments for cancer, inflammatory and immunologic diseases as well as cardiovascular disease. The combined company will have nine products with more than $1 billion in annual sales.
“Our new company will continue the strong patient focus that is core to both companies’ missions, creating a shared organization with a goal of discovering, developing and delivering innovative medicines for patients with serious diseases,” he said.
In addition to established drugs, the combined company will benefit from a pipeline of early- and late-stage treatments, six of which have near-term launches.
“Together, our pipeline holds significant promise for patients, allowing us to accelerate new options through a broader range of cutting-edge technologies and discovery platforms,” Caforio said.
Mark Alles, chairman and CEO of Celgene, said the deal will deliver “immediate and substantial value” to shareholders. The companies expect the deal to be accretive to earnings per share as well as generate more than $45 billion in free cash flow and approximately $2.5 billion in run-rate cost synergies over the first three years after the deal closes.
Upon the transaction’s close, which is expected to occur in the third quarter, shareholders of Bristol-Myers will own roughly 69% of the combined company while Celgene shareholders will own approximately 31%.
Shares of Bristol-Myers Squibb plummeted more than 12% following the announcement to $45.57, while Celgene shares soared more than 25% to $83.99.
According to GuruFocus, both stocks posted significant losses in 2018, declining 15% and 39% over the course of the year.
Disclosure: No positions.
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