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Celgene at $90
Old 02-15-2019, 10:26 AM   #1
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Celgene at $90

I dipped into 1500 shares of Celgene at $89.80

Looking at about a 11% return if the deal is valued at $100 per share. There is also a little bonus item that may be worth a couple bucks a share but I don't know how to value it.

It has some downside risk yes, but certainly not a risk of total loss or even a 50% loss. I estimate the downside risk to be about $20 a share with a low probability.

Anyway, I couldn't find anything else in the market that interested me a lot at this valuation. I guess I could buy puts like some of you but when does that every really work out?

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Old 02-16-2019, 10:37 PM   #2
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Bristol-Myers Squibb offered to acquire Celgene in a deal that valued the biotech at $102.43 per share. Considering that that represents a premium of nearly 17% over Celgene's current share price, buying Celgene stock appears to be a virtual no-brainer if the BMS acquisition is finalized.

Actually, the deal is even more attractive for investors who buy Celgene now. Each Celgene shareholder will also receive one Contingent Value Right (CVR) for each share they own. This CVR entitles holders to get another one-time payment of $9 in cash if the Food and Drug Administration (FDA) approves ozanimod and liso-cel by Dec. 31, 2020 and bb2121 by March 31, 2021.

Sounds like a good bet

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Old 02-17-2019, 06:39 AM   #3
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Does anyone know what the tax calculation would be if someone owns Celgene and holds on through the acquisition? For example if you bought this week at $90, then post acquisition you have received $50 cash and one share of BMY. What is the basis for the $50 and what is the basis for the share of BMY?
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Old 02-21-2019, 09:00 AM   #4
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CELG and BMY volatile today, move by Starboard Value to stop deal by running a slate of directors for BMY board. They (Starboard) had 1 million BMY shares as of 1/31/19. Certainly not enough given the outstanding share count but ...?

It just reminds me that there usually is a reason why things trade as they do, e.g. the discount on this deal. I'm not saying the current price doesn't represent a good arbitrage opportunity, just that sometimes these things are 'telling' us (in the price action) that we don't understand the whole story in terms of risk.
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Old 02-21-2019, 08:49 PM   #5
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This is a cash and stock deal so the market is discounting the price after the dilution of Bristol Myers (BMY) stock. There are currently 1.6B BMY shares outstanding and 699M Celgene shares outstanding. Each Celgene shareholder will receive $50 cash and one BMY share. This means that after the deal there will be 2.3B BMY shares outstanding and more debt. Much more debt. Before this acquisition, BMY debt stood at $1.8B with a net cash of $1.5B. Celgene has about $18.8B of debt. If this deal closes, BMY net debt will increase from $1.8B to a staggering $50.23B as they will issue $32B in new debt to finance the deal and assume Celgene debt.

This deal certainly has it's risk. BMY will likely cut their dividend to keep bond holders happy as Pfizer did after they merged with Wyeth a long time ago.
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Old 02-27-2019, 03:41 PM   #6
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A big BMY shareholder has come out against the deal.

Looks like BMY will have to pay Celgene a tad over $2B if they back out.

Considering Celgene traded in the $100s a short while ago, probably they are going to be ok either way.

Might add at $75 if people go crazy here.
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Old 03-29-2019, 08:54 AM   #7
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Finally the investment went positive. Sold this morning at $94.20

That was a painful hold time, months just to make a measly 5%

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