Fac­ing a crit­i­cal week, Pfiz­er con­fronts an un­spar­ing foe in Star­board

Star­board Val­ue may have lost its first skir­mish with Pfiz­er. But the ac­tivist in­vestor has a track record of pro­tract­ed, bruis­ing fights for con­trol of com­pa­nies that’s like­ly to make it a for­mi­da­ble op­po­nent.

The in­vestor of­ten goes up against big cor­po­rate tar­gets, us­ing deep re­search and caus­tic, de­tailed ar­gu­ments to make the eq­ui­ty stakes it takes feel big­ger than they are, ac­cord­ing to peo­ple who have gone head-to-head with Star­board.

Al­bert Bourla

On Wednes­day, Star­board is sched­uled to meet with Pfiz­er CEO Al­bert Bourla and the com­pa­ny’s lead in­de­pen­dent di­rec­tor Shan­tanu Narayen — the first time the com­pa­ny will like­ly hear, in de­tail, how Star­board thinks Pfiz­er should change. Star­board CEO Jeff Smith is then like­ly to take his broad­er case pub­lic a week lat­er at a high-pro­file ac­tivist in­vestor con­fer­ence where he’s on the agen­da.

Pfiz­er has yet to pub­licly com­ment. Star­board has a rough­ly $1 bil­lion stake in the com­pa­ny, whose shares have fall­en by more than half since the pan­dem­ic. The phar­ma gi­ant has un­der­tak­en a se­ries of cost cuts, changed out top ex­ec­u­tives, added to its pipeline through R&D, and closed or hand­ed off oth­er pro­grams.

When Star­board does fi­nal­ly un­veil its ar­gu­ment, it will like­ly pull no punch­es. The ac­tivist of­ten be­gins with a de­tailed let­ter to a com­pa­ny’s board and man­age­ment, out­lin­ing what it sees as fail­ures. Then there’s a pub­lic pre­sen­ta­tion that can run more than 100 pages.

Jeff Smith

One per­son with ex­pe­ri­ence tak­ing on Star­board re­called the en­gage­ment be­ing in­tense im­me­di­ate­ly. Af­ter Star­board took a stake, it pre­sent­ed to the com­pa­ny’s man­age­ment team, but the two par­ties didn’t see eye-to-eye. The source said what fol­lowed was a pub­lic as­sault on ex­ec­u­tives through let­ters and slide decks, meant to ap­ply pres­sure and gath­er oth­er in­vestors to the ac­tivist’s side.

To counter, the com­pa­ny tar­get­ed by Star­board had a pre­sen­ta­tion of its own, called the “fight deck.”

Star­board’s last phar­ma­ceu­ti­cal fight was with Bris­tol My­ers Squibb, when it an­nounced its op­po­si­tion to the $74 bil­lion takeover of Cel­gene. In a let­ter to the Bris­tol My­ers share­hold­ers, it trashed the deal as “poor­ly con­ceived and ill-ad­vised.” It launched a le­gal de­mand for com­pa­ny records, and point­ed out how its shares had bad­ly un­der­per­formed the mar­ket.

“These re­sults are not re­flec­tive of a man­age­ment team and Board of Di­rec­tors that has earned the right, in our view, to ex­e­cute on a ‘bet the com­pa­ny’ ac­qui­si­tion,” the firm wrote. Aid­ing Star­board was the fact that one of BMS’ largest share­hold­ers, Welling­ton Man­age­ment, had come out pub­licly against the deal days ear­li­er.

A scrupu­lous pre­sen­ta­tion fol­lowed, pulling da­ta, se­cu­ri­ties fil­ings and past com­ments by ex­ec­u­tives to paint the com­pa­ny’s CEO as ill-equipped for the mo­ment.

While Star­board didn’t re­spond to a re­quest for com­ment on its strat­e­gy, Pfiz­er can ex­pect a sim­i­lar treat­ment.

An­oth­er in­di­vid­ual, who ad­vis­es com­pa­nies be­hind the scenes on ac­tivist de­fense and has gone up against Star­board be­fore, de­scribed the firm as one of the most ag­gres­sive and tena­cious ac­tivist firms, will­ing to en­gage in drawn-out, com­plex fights with com­pa­nies. They de­scribed the in­vestor as will­ing to quick­ly take its fights pub­lic and bat­tle them out in the press to win the sup­port of oth­er share­hold­ers.

Star­board failed to block Bris­tol My­ers’ Cel­gene deal, which closed in No­vem­ber 2019. But it may have been proven right — while the S&P 500 has gained 133% since Jan. 2, 2019 (the day be­fore the Cel­gene deal was an­nounced), BMS’ shares are flat.

Oth­er high-pro­file Star­board cam­paigns in­clude Star­bucks, Bloomin’ Brands (the par­ent com­pa­ny of Out­back Steak­house) and Ru­pert Mur­doch’s News Corp.

It was vic­to­ri­ous in a fight with Per­ri­go, an over-the-counter and gener­ics drug man­u­fac­tur­er.

That bat­tle, which start­ed in 2016, cen­tered on what Star­board called fail­ures by man­age­ment to sell the com­pa­ny, af­ter Per­ri­go re­ject­ed an ac­qui­si­tion pro­pos­al from My­lan that was more than dou­ble the share price at the time of Star­board’s first let­ter.

“Un­for­tu­nate­ly, since that time, re­sults have gone de­cid­ed­ly in the wrong di­rec­tion, and man­age­ment’s promis­es have been woe­ful­ly un­ful­filled,” Smith wrote in Sep­tem­ber 2016.

Some five months lat­er, Per­ri­go gave Star­board five board seats, two of which were filled by in­vestors from the firm.

Drew Arm­strong con­tributed re­port­ing.