Investors from Starboard Value--one of the largest shareholders of Depomed ($DEPO)--have posted a scathing public letter to the company demanding that its current board be stripped out and replaced by 6 of its own choices.
The firm--which owns 9.9% of Depomed's outstanding shares--has delivered the open letter to Depomed shareholders today saying it intends to kick-start the process for a “Special Meeting” with shareholders aimed at “removing and replacing the current Depomed board of directors with a modified slate of 6 highly qualified director nominees.”
This comes after the firm made its feelings known back in early April that the company needed to get its act together or face further action.
In the letter, the investors say: “We believe that Depomed is deeply undervalued and significant opportunities exist within the control of management and the Board of Directors to unlock substantial value for the benefit of all shareholders.
“Unfortunately, as we outlined in our previous letter to Depomed on April 8, we have significant concerns regarding serious corporate governance deficiencies, questionable capital allocation decisions, and egregious actions taken by the Board to stymie strategic interest in acquiring Depomed. We believe the Board clearly lacks the independence, objectivity, and perspective needed to make decisions that are in the best interests of shareholders.”
Starboard said that it has gathered together 6 candidates for the Special Meeting possessing “unique skill sets and perspectives directly relevant to Depomed's business and current challenges.” These 5 men and 1 woman are “prepared to serve the shareholders of Depomed” and “ensure that the interests of all shareholders are of paramount importance,” the firm added.
It’s been a tough few years for Depomed, which has dealt with a number of trial failures and lawsuits. Last fall it also saw Horizon ($HZNP) walk away from a long and acrimonious buyout attempt.
Horizon had hoped to buy Depomed for $33 a share and spent months pressuring management and agitating for a special shareholder meeting to vote on its offer. But Depomed filed suit claiming Horizon had used confidential information to set its asking price, and a California judge agreed in a ruling handed down in November, prompting its pursuer to withdraw its offer.
Depomed released its own statement several hours after Starboard’s letter. It said: “Over four weeks ago, in response to Starboard’s first request for a record date to call a special meeting, Depomed amended its now terminated shareholder rights plan to lower the trigger to 9.9% to allow Starboard to call a special meeting.
“Furthermore, we expressly communicated to Starboard that, recognizing Starboard’s reported status as a 9.9% shareholder, Depomed was prepared to facilitate Starboard’s delivery of the formal notice to call a special meeting without having to conduct any further solicitation--whether public or private. We never heard from Starboard or its advisors on this point. We are therefore surprised by Starboard’s announcement this morning that they not only want to restart the process to call a special meeting, but that they also want to go through a public solicitation to call a special meeting. Depomed’s Board will consider Starboard’s new requests in due course.
“Depomed’s Board and management are committed to creating value for all Depomed shareholders. As always, the Company is open to shareholders’ perspectives, and regularly reviews its strategic priorities and opportunities.”
This is in fact the second case this month of investor activism, after Wildcat Capital wrote an open letter to Californian biotech Sorrento in April, telling it to ax its CEO and take better measures to maximize shareholder return.
- check out Starboard’s open letter and list of board candidates
-read Depomed’s statement
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