Starboard attempts a coup at Depomed

AP News
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Posted: Apr 08, 2016 11:27 AM

Activist investor Starboard Value is bringing its next boardroom coup attempt to Depomed, asking shareholders to replace all the pain drugmaker's directors with those of its own choosing.

Shares of Depomed spiked 14 percent Friday.

Starboard is nominating six people for the drugmaker's board and searching for additional candidates, accusing the current directors of being more concerned with entrenching themselves than improving shareholder value. Starboard, of New York, has acquired a nearly 10 percent stake in the Newark, California, company.

Depomed said in response Friday that its board is committed to creating value for all shareholders, and it said stock owners should take no action.

Starboard executive Jeffrey C. Smith called Depomed shares deeply undervalued in a letter to the drugmaker's board and CEO Jim Schoeneck. Smith also said Starboard was concerned with actions taken by the board.

"Specifically, we have significant concerns regarding serious corporate governance deficiencies, questionable capital allocation decisions, and egregious actions taken by the (board) to stymie strategic interest in acquiring Depomed," Smith wrote.

Starboard was particularly incensed with Depomed's rejection of a takeover bid by Dublin's Horizon Pharma last year. Smith noted that Horizon's initial offer price of $29.25 per share would have represented an all-time high at the time for a stock that closed at $15 on Thursday. He also noted that Depomed shares topped $33 last summer, following Horizon's final offer.

Starboard did not name its board nominees, referring to them only as "Starboard Value investment professionals."

"Given your actions, and history of actions, we cannot take the risk that you further impair our shareholder rights," Smith wrote.

Starboard is leading a shareholder mutiny at Yahoo as well, where it also wants to replace the board in a fight for control. It also has pushed for the department store operator Macy's to split its real estate assets off into separate companies.

It succeeded in ousting the board at Olive Garden owner Darden Restaurants Inc. in 2014. Smith led that board as chair until earlier this week, when he stepped down after a particularly strong quarter for the company.

Shares of Depomed jumped more than 11 percent, or $1.72, to $16.72 in late-morning trading.