Summary
- The Bristol-Myers Squibb acquisition undervalues Celgene.
- Bristol-Myers would also be undervalued post-deal at current prices.
I am inclined to keep the BMY stock I receive.
Bristol-Myers Squibb (BMY) is buying Celgene (CELG), with the deal likely to close in Q3. I do not own BMY stock, though I have looked at that possibility on occasion. A substantial amount of my portfolio is Celgene stock. In this story I will examine whether I should keep the BMY stock I am issued, or possibly also take the cash payment and invest it in BMY. I assume Celgene will not go high enough before the deal closes to make selling it an attractive option.
My thesis is that I should keep the BMY stock I am issued. I have months to make a final decision and to make a more detailed study of BMY. My findings should apply to long-term biotech investors like myself, and the facts could be of use to investors with other strategies. I have owned Celgene stock since 2007.
The Bristol-Myers' offer for Celgene
Bristol-Myers Squibb to acquire Celgene, released on January 3, 2019, may prove to be the biggest pharmaceutical news of all 2019.
Celgene stock holders will receive one share of Bristol-Myers for each share of Celgene. They will also get $50 in cash per share. Before the press release BMY closed at $52.43, implying those components of the deal were worth $102.43 per share. However, BMY plunged when the deal was announced, recovering to close at $47.99 on January 11.
