M&A

Stock activists fire back at Allergan’s defensive moves, push for a company sale

Allergan’s attempt to assuage its critics — or at least shore up support among investors — by adding industry headliner Bob Hugin to the board and calling for an eventual division of the chairman and CEO roles at the company has inspired a wicked backlash.

David Tepper (Carnegie Mellon)

Hours after Allergan $AGN posted the move, saying it would separate the two top roles during an eventual leadership transition, its activist critics at Appaloosa LP — helmed by Carolina Panthers owner David Tepper — posted a letter bashing Allergan’s move in no uncertain terms. And they go on to say that it would be better for Allergan to go ahead and explore other options, like a sale of the company.

Ex-Celgene CEO Hugin was put on the board, you say? Not good enough, replies Tepper.

(H)ad you seriously intended to take meaningful action, Bob Hugin would have been a credible candidate for Chairman given his standing in the industry.

Appaloosa also goes on to prod Allergan for numerous shortcomings, from billions in write-downs, embarrassing legal maneuvers (an apparent poke at the Mohawk patent gambit), big paydays and a seriously deflated stock price.

Their move today….

“…falls short of improved governance and once again lays bare your reluctance to hold management accountable for its dismal performance. This response, following three years of proxy proposals and prodding from large shareholders such as Appaloosa, bears remarkable similarity to last year’s aborted “Strategic Review” – that is, a lame attempt to deflect pressure through token measures that sidestep the Company’s defects and desperately preserve the managerial status quo.

Bob Hugin

Tepper adds that he intends to press for the separation and strategic review, calling the current board “subservient” and their resolution “toothless.”

Moreover, your ineffectual efforts suggest that this Board and management team may be incapable of executing a business plan that will realize Allergan’s inherent value. If, in fact, the Board is unable or unwilling to hold management accountable for its shortcomings or find a suitable replacement, it is your fiduciary obligation to explore other options, including a merger or sale of the Company.

Allergan CEO Brent Saunders, though, isn’t going for the redirection from Tepper, calling it disruptive.

Implementing a leadership change in the manner Appaloosa is recommending would be highly disruptive to the Company and diminish Mr. Saunders’ ability to continue to execute Allergan’s strategy to create a world-class global biopharmaceutical business and develop the Company’s promising pipeline.  In contrast, the shareholder proposal that our Board supports minimizes disruption and allows for the separation of the Chair and CEO positions with the next leadership change, as these resolutions typically provide.

 


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