Starboard urges Depomed board to pursue a potential sale

Fri Apr 8, 2016 11:31am EDT
 
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(Reuters) - Activist investor Starboard Value LP, which has an economic stake of 9.8 percent in Depomed Inc DEPO.O, in a letter criticized the drugmaker's board over corporate governance deficiencies and other matters and urged it to explore a potential sale.

Depomed's shares were up 11.6 percent at $16.71 in morning trading on Friday.

In the letter addressed to the Depomed board, Starboard raised concerns regarding the company's "corporate governance deficiencies, questionable capital allocation decisions, and egregious actions taken by the Board to stymie strategic interest in acquiring Depomed".

Starboard has taken aggressive actions at other companies in which it has invested, including engineering the ouster of the board of Darden Restaurants Inc (DRI.N: Quote) in 2014.

Depomed on Friday recommended that shareholders take no action at this time. It noted Starboard had not communicated with the company before disclosing its stake in a regulatory filing and had not attempted to hold any discussions with it.

Starboard disclosed a voting rights stake of 6.8 percent in Depomed in a regulatory filing on Thursday. Including other financial agreements, its exposure rises to 9.8 percent.

Starboard pointed out that the drugmaker's move to reincorporate itself in Delaware would limit shareholders rights, including a provision to call for special meetings.

The hedge fund said it intended to immediately nominate its chief executive, Jeffrey Smith, to Depomed's board along with five other nominees.

Starboard said Depomed had taken a "series of shareholder-unfriendly steps," referring to the company's decision to reject takeover offers made by drugmaker Horizon Pharma Plc (HZNP.O: Quote) last year.   Continued...

 
Jeff Smith, CEO and chief investment officer of Starboard Value, L.P., speaks at a panel discussion at the SALT conference in Las Vegas May 14, 2014. REUTERS/Rick Wilking