U.S. pharmaceutical giant Bristol Myers Squibb (BMS) has put on a rapid takeover sprint as the year draws to a close. After the company from the famous university city of Princeton/New Jersey announced its acquisition of Karuna Therapeutics for $14 billion on December 22, 2023, it announced another mega-deal on Christmas Day.

BMS announced that it had signed an acquisition agreement with the radiopharmaceuticals specialist RayzeBio, Inc. Under this agreement, RayzeBio is valued at a hefty $4.1 billion, including debt.

Before I explain further details of the acquisition agreement, I would like to give a brief introduction to the two companies involved.

The companies in brief RayzeBio, the California-based startup, is developing radiopharmaceutical therapeutics (RPTs) to treat various types of cancer. Its most promising RPT is RYZ101, which is already in phase 3 of clinical trials.

RYZ101 is a therapeutic for the treatment of hormone-producing tumors of the digestive system. More promising products are in RayzeBio’s development pipeline.

The company, founded in 2020, employs about 100 people. RayzeBio has no approved therapeutics on the market yet, but is already constructing a 6,000-square-meter production facility in Indiana, which is due to be completed soon.

As is usually the case with R&D startups, RayzeBio reported no revenue in its 2022 fiscal year. Its operating loss (EBIT) was $72.1 million.

Bristol Myers Squibb, whose predecessor company was founded in 1858 in Brooklyn/New York, is, according to its own statements, a global and leading biopharmaceutical company.

The Princeton-based company has set itself the task of discovering, developing and providing innovative medicines to help patients conquer serious diseases.

With around 34,000 employees, BMS reported revenue of almost $46.2 billion in its 2022 fiscal year. Its operating profit (EBIT) in 2022 was around $8.9 billion.

Further details of the takeover BMS is offering shareholders of RayzeBio $62.50 in cash for each of their shares. This values RayzeBio at around $4.1 billion, including debt. The offer includes a takeover premium of just over 104% compared to the closing price of RayzeBio’s stock on December 22, 2023, the last trading day before the announcement of the offer.

BMS primarily intends to finance the deal through the issuance of new debt securities. The pharma giant from Princeton also intends to acquire all of the RayzeBio shares not tendered in response to the takeover offer in a squeeze-out for $62.50.

How the stock market reacted On Christmas Day (December 26, 2023), the day the takeover was announced, the price of RayzeBio stock on the New York Tech Exchange Nasdaq doubled and ended the day at $61.40.

This price was only slightly lower than the $62.50 offered by BMS. Investors obviously expect a smooth completion of the mega-deal.

In contrast, the price of BMS stock on the New York Exchange NYSE fell on December 26, 2023. The closing price was $51.45, down -1.6% from the price on December 22, 2023. Investors apparently believe that two mega-deals in such a short time (and possibly the high takeover price) cannot be fruitful.

You should know: The two mega-deals announced around Christmas are not the only billion-dollar deals BMS has made this year. In October 2023, BMS offered up to $5.8 billion for the acquisition of US cancer drug maker Mirati Therapeutics.

What’s next BMS expects the transaction to be completed in the first half of 2024, subject to the satisfaction of the customary closing conditions, such as the tender of the shares by the RayzeBio shareholders, the subsequent squeeze-out and the approval of the deal by the authorities.