The $74 billion merger between Bristol and Celgene was an uncertain one, opposed by Wellington (more than 8% of BMY) & Starboard (recently added position of less than 0.5% of BMY).
The merger in assets actually makes sense to me and should make sense to many investors. But the question of BMY-only shareholders, who don’t own much CELG stocks, is that the benefits are probably captured unevenly by Celgene.
Suppose the base case for Celgene stock price without acquisition is $75 and the merger price is $50 cash + 1 BMY share ($52 value) + $9 option ($3 value) -> $105 per share – when it was traded at $90/share, the market suggested a probability 50% of a successful merger. [75*(1-p) + 105*p = 90]
When CELG was traded at $84, the market suggested a success rate of 30%. [75*(1-p) + 105*p = 84]
(Yes, the market just take simple numbers… )
Wellington/Starboard might just want to add more negotiation power to get some other benefits (special board treatment e.g.) or to load up some CELG…
BMY alone probably won’t perform very well, they should understand that.