Glass Lewis Backs Cephalon Board Against Valeant
April 29 2011 - 1:57PM
Dow Jones News
Proxy advisory firm Glass Lewis recommended that Cephalon Inc.
(CEPH) shareholders don't support an attempt by Valeant
Pharmaceuticals International Inc. (VRX) to unseat its board,
something needed for its $5.7 billion hostile offer to move
forward.
Mississauga, Ontario-based Valeant has started the process of
soliciting Cephalon shareholders to replace the board and has
placed a deadline of May 12 to reach a conclusion about whether it
has the support it needs. Cephalon has rejected the cash bid of $73
a share as inadequate.
A Valeant spokeswoman said, "although this decision is
disappointing, it is not unexpected. We continue to talk to
investors and believe many understand the corporate governance
issues and remain supportive of our initiative."
A Cephalon spokesman wasn't immediately available for
comment.
In its report, Glass Lewis said it found "little reason" to
support Valeant. It generally doesn't support removal of a sitting
board unless there are serious problems and a dissident has a good
plan to help the situation, or the current board has made decisions
that are clearly against shareholder interests.
The firm said the Cephalon board "remains in the best position"
to determine strategic alternatives for the company and
shareholders.
"We find that the incumbent directors have acted appropriately
with respect to Valeant's approach and we find no reason to believe
that the directors are conflicted with respect to the review
process," it said.
In order to unseat the board, Valeant needs a majority vote, or
about 37.9 million shares. If successful, Valeant will push the new
board to remove a poison pill that blocks a hostile takeover and
ask to conduct due diligence.
Reviewing the company's books should take another two to three
weeks, Valeant has said, and could result in a "modest increase" in
the offer.
Glass Lewis noted that such contentious situations "there
remains a possibility that the companies will come to terms on an
agreement."
Wall Street is clearly expecting a higher offer from Valeant, or
a competing bidder, as the stock has traded above the offer since
it became public. It recently changed hands at $76.72, up 9
cents.
--By Thomas Gryta, Dow Jones Newswires; 212-416-2169;
thomas.gryta@dowjones.com
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