Activist investor Third Point takes on Baxter with 10% stake, wants two board seats

Daniel Loeb

Daniel Loeb likes the life sciences. He has a long history of taking on management at big biopharmas--and twisting their arms to accommodate his vision for the company. His investment firm Third Point most recently started calling for a breakup of biotech bellwether Amgen last fall. It was also pivotal in the breakup of PDL in 2007 into innovative biotech Facet, which was acquired by Abbott ($ABT) for $450 million in 2010, and a royalty-focused company.

Now Loeb is taking on medical products player Baxter ($BAX), which recently split from its biopharma division, Baxalta ($BXLT). The latter is also under a $30 billion hostile bid from Shire. The separation was just complete as of July 1. Third Point has taken on companies in other industries as well, including Dow Chemical, Sony and Yahoo!

In an Aug. 5 open letter to Baxter execs, Loeb said that his funds are Baxter's largest shareholder with an almost 10% stake worth almost $2 billion. That's a huge commitment given that the firm has roughly $17 billion under management. He added that already in conversations with Baxter, the company had demonstrated a "willingness to consider" new company directors.

Third Point is angling for two board seats and Loeb said he expected that they would be elected at the 2016 company meeting. In 2015, Baxter annual meeting was on May 5--suggesting a similar date for the event next year.

Loeb was critical of Baxter's corporate governance rules in the open letter, saying "The company's staggered board--exacerbated by an odd voting structure that values shareholders individually rather than according to economic interest--is shareholder unfriendly and archaic." That makes it seem likely that initiatives to change the board composition and the company voting structure will also be on the table at the next Baxter shareholder meeting.

He added that he was pleased that the company had decided last month to "implement a CEO succession plan." Loeb offered Baxter help from Third Point in the selection of a new Baxter CEO--as well as to "drive strategy" and offer a "thoughtful perspective on capital allocation."

For its part, Baxter responded with an Aug. 5 statement, underscoring how much the company wants to play nice with its activist investor. It confirmed that there have been meetings with Third Point, highlighted how much it values shareholder input and said expects "to continue a constructive dialogue."

- here is the Third Point letter
- and here is the Baxter response