Depomed Makes Peace With Activist Investor

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Starboard Value, a notable activist investor, has been pushing Depomed (NASDAQ: DEPO), a pharmaceutical company that focuses on treating pain and other central nervous system conditions, to take immediate action that could unlock shareholder value.

Starboard Value is Depomed’s second largest investor and holds a 9.9 percent stake in the company.

In a letter delivered Depomed in July, Starboard Value said it has “significant concerns regarding serious corporate governance deficiencies, questionable capital allocation decisions, and actions taken by the Board to stymie strategic interest in acquiring Depomed”

Depomed has been pushing the company to add executives to its board which it believes are qualified and can help steer the company in the right direction.

The activist investment firm also brought on Robert Savage, a former Chairman for Johnson & Johnson’s pharmaceuticals division and James Tyree, a former Executive Vice President of pharmaceutical products at Abbott Laboratories as advisors.

Starboard Value wouldn’t be blamed for doing a victory dance on Monday as Depomed announced that it has agreed to add three new members to its board team, including Savage and Tyree.

Depomed also added James Fogarty, another Starboard backed executive whose diverse background includes President and CEO of American Italian Pasta Company and CFO of Levi Strauss.

Fogarty also worked with Starboard Value when it completely overhauled the Board of Directors of Darden Restaurants (NYSE: DRI) following an activist battle.  Today it is nearly unanimously regarded as a success story which saw the popular Italian-American food chain, Olive Garden, improve its operations and turn around its declining business.

“We are pleased to have reached this agreement with Starboard, which we believe is in the best interests of our shareholders,” said Jim Schoeneck, President and CEO of Depomed. “We are confident that we are aligned to deliver significant value to our shareholders.”

“We are pleased to have reached an agreement to work with Depomed.  We believe the addition of these three highly qualified directors will add to the experience in the boardroom and expect that the board and management team will focus on delivering significant value for shareholders,” said Jeffrey C. Smith, Chief Executive Officer and Chief Investment Officer of Starboard Value.