- Activist investor Starboard Value will continue its efforts to replace Depomed's board of directors, even after the California-based specialty pharmaceutical company dropped its plans to reincorporate in Delaware.
- Depomed abandoned its reincorporation plans last Thursday, indicating it wanted to avoid a "costly and distracting proxy contest."
- Earlier in the week, Starboard had sent a letter to Depomed accusing the company of trying to restrict shareholder rights. The investment adviser owns nearly 10% of Depomed and is seeking six seats on the company's board.
Depomed aimed to strengthen its defenses against hostile takeovers by reincorporating in Delaware. Last year the company staved off a $3 billion bid by Horizon Pharma which sought to acquire Depomed's pain and central nervous system drugs. Horizon eventually gave up after being rebuffed by Depomed.
Since then, however, Depomed's stock has fallen considerably, leading Starboard to accuse the Board of putting more effort into protecting their positions rather than maximizing shareholder value.
"This company has a troubling record of manipulating Depomed's corporate machinery to entrench management and the Board," Starboard said in its letter last week.
Specifically, Starboard alleges the Board is attempting to eliminate the ability of shareholders to remove current Board members by calling a special meeting, as well as increasing the voting share required for calling a meeting to 25% from 10 percent. Delaware law sets the threshold at 25%, while in California it stands at 10%.
"The Reincorporation Proposal was an attempt by the Depomed Board to further suppress shareholder rights under the guise of a benign Delware reincorporation," Starboard said in its most recent statement.
For its part, Depomed has said it is focused on growing its business and previously noted Starboard did not communicate with the company prior to making its accusations.