Wellington to Bristol: Celgene is a bad bet

Bristol-Myers Squibb expects to close its $74 billion acquisition of Celgene in the coming months, but one major shareholder just threw a spanner in the works.

Wellington, which manages something like $1 trillion in assets, wants Bristol to back out. Its reasons are pretty simple: The purchase price is way too steep when you consider all the risks tied to Celgene’s business, and there are better opportunities out there for a company with as much cash as Bristol.

That’s not a terribly uncommon opinion in biotech circles, but the fact that it’s being spoken by Wellington is important. The fund claims to own a roughly 8 percent stake in Bristol, making it the company’s largest institutional investor. Bristol said in a statement that it still believes the acquisition is wise and reasonably priced, and the company is confident shareholders will ultimately approve the merger come April.

But with Wellington joining activist investor Starboard in arguing against idea, management’s best laid plans could be in peril. And Wall Street has taken notice. Celgene's share price fell more than 10 percent after hours yesterday on concerns that, as Baird analyst Brian Skorney put it in a note to investors, "we may have miscalculated the passivity of large-cap investors when it comes to this deal."