Stada Arzneimittel Braced for Investor Battle
August 15 2016 - 10:20AM
Dow Jones News
FRANKFURT—Germany is gearing up for a rare proxy fight between
activist investors and a company's incumbent management with
pressure mounting on the board of generic drugmaker Stada
Arzneimittel AG ahead of a shareholder meeting later this
month.
Shareholder advisory firm International Shareholder Services is
among those leading the charge against Stada's management, calling
for the chairman of the company's supervisory board Martin Abend to
be replaced by Eric Cornut, a former executive at Swiss drugs giant
Novartis AG.
Mr. Cornut has been nominated for the chairmanship by Active
Ownership Capital, a German activist investment fund which is
Stada's largest individual shareholder with roughly a 5% stake.
Proxy fights remain relatively rare in Germany where it is usual
practice for companies to have a supervisory board and a management
board unlike the single-board structure typical in the U.S. or
U.K.
A maker of household German cold treatment Grippostad and
over-the-counter products like sunscreen with yearly revenue of
€2.12 billion ($2.36 billion), Stada has been long been seen as a
possible takeover target for bigger rivals or private-equity
firms.
The company rejected an informal approach earlier this year by
Polish peer Polpharma SA, which floated the idea of merging the two
companies, according to people familiar with the matter.
These people added that a tie-up could have resulted in more
than €140 million in yearly synergies. A spokesman for Stada
declined to comment.
In the spotlight at Stada is what some investors see as a
mismatch between the company's executive pay and its long-term
earnings record
"There appears to be a misalignment between performance-linked
remuneration and the company's actual performance," said ISS in the
report dated Aug. 10
ISS said Stada's shares have "significantly underperformed
peers" over the past couple of years. "Change on Stada's
supervisory board is warranted due to weak past performance and
governance," ISS said.
"We strongly disagree with ISS' evaluation and recommendations
with regard to the supervisory board elections as well as executive
board remuneration. We note that ISS appears to have had at least
in parts access to incomplete or erroneous assumptions and data,"
Stada told institutional investors in a letter reviewed by The Wall
Street Journal.
It added the activist fund's "proposal is aimed at obtaining
full control over Stada via the supervisory board."
Stada's shares were flat over the past five years until February
this year.
Since then its shares nearly doubled to currently above €50,
partly fueled by hopes on a takeover offer. The Wall Street Journal
reported in May that Stada held initial talks with private-equity
firm CVC Capital Partners. People familiar with the matter said
private-equity firms remain interested in a potential buyout.
In contrast, shares of U.S. rival Mylan NV gained around 150%
over the past five years. On the other hand, shares in another
rival, Perrigo Co., fell by more than 40%, mainly because of a
steep decline this year after its CEO was tapped to lead Valeant
Pharmaceuticals International Inc.
Stada is also reportedly under pressure from other quarters.
Another shareholder adviser, Ivox Glass Lewis, recommended that
investors vote against the company's management salary system,
while supporting supervisory board chairman Mr. Abend, according to
German daily Boersenzeitung.
U.S. activist investor Guy Wyser-Pratte told a German daily
earlier this summer that he took a stake in Stada, saying the
company had missed opportunities in the past and that it should
team up with an international rival.
Write to Eyk Henning at eyk.henning@wsj.com
(END) Dow Jones Newswires
August 15, 2016 10:05 ET (14:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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