ImClone - Bristol-Myers Merger: The Negotiations Begin

Just before the opening bell yesterday morning, ImClone Systems (IMCL) put out a clearly Carl Icahn-inspired press release regarding last week's $60-a-share buyout offer from Bristol-Myers Squibb (BMY).

Mr. Icahn, ImClone Chairman, hasn't said anything about the proposal on his blog, but he has plenty to say about it in the official company statement. He says he was very flattered by the nice things BMY Chairman and CEO Jim Cornelius had to say about him. For example, on a conference call with reporters last week, Mr. Cornelius said, "He (Icahn) has my greatest respect for what he has done with the company since he became Chairman. Our (BMY & IMCL) relationship has blossomed. My hat's off to him."

But that's it for the niceties. First of all, Icahn and the Board think the BMY offer "substantially...greatly undervalues" IMCL. Investors have already made that clear, bidding up the stock to more than $65 last week. Interestingly, the stock was down yesterday in the wake of the press release.

But Icahn doesn't confine his comments to the price. ImClone reveals that it was thinking about breaking itself into two pieces: the Erbitux (the cancer drug) business and its drug development pipeline which the statement says "may be extremely valuable and significantly increase stockholder value as a separate business."

The press release doesn't name names, but it calls out the ImClone Board's Bristol-Myers designee (that would be BMY's Sr. VP of Strategy and Product Transformation, John Celentano) because he was allegedly privy to Board discussions about the potential breakup. So, the statement says, "The Board is reviewing whether Bristol-Myers had access to confidential information concerning ImClone and its pipeline."

A spokesperson for Bristol yesterday said the company had no comment at the moment. The press release had just hit the tape, though. On a conference call with analysts and investors on the morning it made the offer, BMY officials said they had grown increasingly optimistic about IMCL's pipeline prospects. Later that day, on the media conference call, one reporter--if my memory serves me correctly, I think it was Stephanie Saul at The New York Times--pressed officials to specify what drugs they were excited about. But they wouldn't go there.

On that same call, Cornelius said that the ball was in ImClone's court. Icahn has just smashed it back.

Update: Through a spokesperson, Bristol-Myers Squibb has issued the following response to the ImClone statement: "As we stated last week, we believe we have made a full and fair offer. We look forward to a response from ImClone's Board on that offer."  

Comments

[Bob Gary]

These mergers are just beginning. A lot of inefficiency still in this sector. I also think Investment Banks will start buying smaller less-leveraged banks to de-leverage balance sheet risk.

2008 Aug 05 01:22 PM