Baxter makes nice with activist investor Third Point, offers board seats

Third Point's Munib Islam

Faced with a challenge from activist investor Third Point, Baxter ($BAX) has opted to try to placate rather than resist. The pair first started wrangling publicly in early August when the firm disclosed a 10% stake in the company in an open letter requesting two board seats.

At that time Daniel Loeb, who heads Third Point, said he would aim for election of a pair of board members at the 2016 annual company meeting, which occurred in May this year. The investment firm wants to help reshape the post-Baxalta split company to improve its market share and margins.

Now in an agreement with Third Point, Baxter has appointed to its board Third Point Partner Munib Islam, in addition to another mutually agreed upon independent director who has yet to be disclosed. But Baxter is diluting the impact of that a bit by expanding its board to 12 members with the addition of the two new ones rather than replacing existing directors.

Islam "will provide fresh perspectives from the company's largest shareholder and will be able to draw upon his significant capital allocation and public market experience," said Baxter lead independent director Thomas Stallkamp in a statement. "We are committed to fostering long-term growth and believe his addition will augment Baxter's commitment to accelerating profitable growth as a leading global medical products provider."

Third Point and Baxter have agreed to standstill and voting provisions, as well as to declassify the company's board. The company also said it will work toward an annual election of its directors at the 2016 annual meeting.

Islam heads equity research at Third Point. He previously was a Managing Director and Portfolio Manager at Highbridge Capital. Prior to that he was with VC firm Oak Hill Capital and investment bank Lazard.

"Following the spinoff of Baxalta, Baxter has a unique opportunity to increase both its margins and its market share in the growing, innovative medical products industry," said Islam. "I'm confident the board will benefit by including a significant shareholder's perspective and am committed to working with the board to unlock substantial additional value at Baxter."

Baxter held 53.9 million Baxter shares (9.9%) at Sept. 29, worth roughly $1.8 billion. The firm committed to not buy more than 13% of Baxter. Baxter was up about 2% on the news of the compromise--but it's still down around 17% on the year due to the Wall Street response to Third Point's challenge starting in August.

- here is the Baxter announcement
- and the related Third Point SEC filing

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