Proxy Advisory Firms Back Allergan in Battle with Dissident Shareholder Appaloosa

Allergan said Monday that proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis have recommended that shareholders vote for all of the board’s proposals at its annual meeting on May 1, and against hedge fund Appaloosa’s proposal calling for the immediate separation of the drugmaker’s chairman and CEO roles, according to FirstWord. Allergan stated last month that it planned to split the roles, but only at the next leadership transition.

Commenting on the proxy advisory backing, Allergan’s board of directors said “their recommendations affirm our position that our plan to adopt separate chair and CEO positions with the next leadership transition is the best approach for Allergan shareholders.”

The drugmaker cited the ISS report as saying “the board has already been responsive to the request of the prior year’s proposal by adopting an independent chair policy to be phased in at the next CEO transition.” ISS also noted that Allergan has “adopted a robust lead independent director role” with clearly defined duties, and has “substantially refreshed itself” by appointing six new board members since 2016. However, Appaloosa issued a statement calling the ISS recommendation “baffling” as they were “inconsistent” with the firm’s support for a similar proposal last year, and once again urged shareholders to vote for its proposal.

Meanwhile, Glass Lewis is cited as saying “we are not convinced that adoption of [Appaloosa’s] proposal is necessary at this time,” noting that the phasing in of Allergan’s policy upon the next CEO transition “essentially implements” the hedge fund’s request.” Accordingly, we do not believe that adoption of this proposal would affect any meaningful change in the company’s leadership structure following the next CEO transition,” Glass Lewis said.

Commenting on the news, RBC Capital Markets analyst Randall Stanicky remarked “this news is likely to frustrate a sizeable group of shareholders and we continue to await the result of the vote.” 

Appaloosa stepped up its pressure on Allergan late last month following the recent failure of its investigational depression drug rapastinel in multiple late-stage studies. The hedge fund has also suggested that Allergan should consider a sale or merger if it is “unable or unwilling to hold management accountable.”