Proxy firms Glass Lewis, ISS back Allergan in fight against Appaloosa

Proxy firms Glass Lewis, ISS back Allergan in fight against Appaloosa

(Reuters) – Two major shareholder advisory firms urged investors to vote against billionaire investor David Tepper’s hedge fund demand that Allergan Plc immediately split the roles of chief executive officer and chairman, in a boost to the Botox maker.

FILE PHOTO: Allergan ticker info and symbol are displayed on a screen on the floor of the New York Stock Exchange (NYSE) April 6, 2016. REUTERS/Brendan McDermid

The recommendation from Institutional Shareholder Services LP and Glass Lewis & Co against the proposal of Tepper’s Appaloosa gives firepower to Allergan Chairman and CEO Brent Saunders ahead of the drugmaker’s shareholder meeting on May 1.

“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,” Allergan said in a statement.

However, an analyst said the recommendations were contrary to the views of many investors.

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

Appaloosa has been pressing Allergan since last year to separate the two roles, and asked for an immediate split after Allergan said an independent member of its board would be chairman, but only at its next leadership change.

Both the proxy firms said that an immediate separation of the roles was not necessary.

“There are no significant concerns regarding the board’s current leadership structure sufficient to suggest that an immediate split of the CEO and chairman roles is warranted at this time rather than at the next CEO transition,” ISS was quoted as saying in the Allergan statement.

Appaloosa said ISS’ recommendations were “baffling” as they were inconsistent with the firm’s support for a similar proposal last year, and asked shareholders to vote for its proposal.

Allergan, under pressure to rescue the company’s falling stock prices, launched a review of its strategy last year. But that review is likely to result in the sale of its relatively small infectious disease unit.

Appaloosa has voiced its discontent with the results of the review, and has called for a breakup or sale of the company, citing recent clinical failures such as that of its depression treatment rapastinel.

Allergan’s shares have fallen about 12 percent in the past 12 months. They trade nearly 60 percent below their record high of $340.33 in 2015.

Reporting by Manas Mishra in Bengaluru; Editing by Maju Samuel

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