Depomed, Inc. DEPO
Depomed's board is entrenching itself via a California-to-Delaware reincorporation and rejected Horizon's premium bid; Starboard seeks a special meeting to replace directors and explore a sale.
Thesis
Starboard Value, a 9.8% shareholder, argues Depomed is deeply undervalued and the board has repeatedly entrenched itself at shareholders' expense. In July 2015 the board rejected Horizon Pharma's unsolicited $29.25/share offer (later raised to $33.00) at a 42% premium, adopted a 10% poison pill and onerous special-meeting bylaws, and pursued a Janssen-related lawsuit that cost shareholders $11.9 million in legal fees; the stock has since fallen 56% to $15.00. Now the board proposes reincorporating from California to Delaware with buried provisions that raise the special-meeting threshold to 25%, eliminate shareholders' ability to remove directors at a special meeting, and hand the board sole discretion over timing. Starboard has filed a Record Date Request Notice, nominated six director candidates, and demands board change to preserve shareholder rights and explore a sale.
SCQA
Depomed is a specialty pharmaceutical company whose board, following Horizon Pharma's 2015 unsolicited acquisition approach, has repeatedly adopted defensive bylaws and a poison pill to block shareholder input on strategic alternatives.
The board rejected Horizon's $33/share bid, pursued costly litigation, and is now pushing a California-to-Delaware reincorporation with buried provisions that gut shareholders' right to call special meetings and remove directors.
Starboard has filed a Record Date Request Notice to call a special meeting, nominated six director candidates, and urges shareholders to oppose the Reincorporation Proposal so a sale and capital discipline can be pursued.
No explicit price target is given, but Horizon's $33 bid versus the $15 current price implies upside of over 120% if a board change enables a sale or better capital allocation.
The three reasons
- 1
Board rejected Horizon's $33/share offer; stock has since fallen 56% to $15
- 2
Reincorporation Proposal buries provisions raising special-meeting threshold to 25% and blocking director removal
- 3
Ill-advised Horizon lawsuit cost shareholders $11.9M and deprives them of strategic acquirers
Primary demands
- Withdraw or substantially amend the California-to-Delaware Reincorporation Proposal
- Call a special meeting of shareholders to replace board members
- Cease entrenchment tactics (poison pill, onerous special-meeting bylaws)
- Drop the Horizon/Janssen lawsuit that deprives shareholders of strategic acquirers
- Explore a sale of the Company given operating, financial and tax synergies
- Halt acquisition ambitions given levered capital structure and expensive debt
- Rationalize R&D and improve capital allocation
KPIs cited
Pattern membership
Where this document fits across the library's 12 rhetorical / structural patterns.
Precedents cited
- Horizon Pharma 2015 unsolicited bid and special-meeting consent solicitation
- ISS and Glass Lewis recommendations supporting Horizon's special meeting (Sept 2015)
Notable slides (2)
Notes
Plain-text letter on Starboard letterhead, signed by Jeffrey C. Smith; announces Record Date Request Notice and simultaneous nomination of six director candidates (five Starboard professionals). Strong governance/entrenchment narrative leveraging ISS and Glass Lewis quotes and the Horizon withdrawn bid as implicit valuation anchor. Letter promises follow-up materials with more detail on value-creation opportunities. No charts, no sum-of-parts, no explicit target price.