Horizon, Depomed Battle in Takeover Bid
The specialty pharmaceutical companies, Horizon Pharma and Depomed, continue to do battle over Horizon’s takeover bid to acquire Depomed. In the latest developments, Jim Schoeneck, president and CEO of Depomed, sent a letter to Timothy P. Walbert, chairman of the board, president and chief executive officer of Horizon Pharma, on August 7, 2015, outlined the latest position of Depomed in Horizon’s takeover bid for Depomed. On July 29, 2015, the Depomed Board unanimously rejected Horizon’s previous revised unsolicited proposal to acquire all outstanding common share of Depomed at a price of $33.00 per share in an all-stock transaction. The revised proposal, made on July 21, 2015, increased Horizon’s initial offer of $29.25 per share.
“In our conversation late last week, you stated that Horizon was prepared to increase its proposal and to include a cash component of up to 25%…Yet you still have not made a new proposal. Instead, you have insisted that we need to first make a counter-offer. It does not make any sense to engage with Horizon unless you make a sufficiently compelling and detailed proposal. As we have previously told you, in order to be compelling, a proposal must reflect what Depomed would contribute to the combined company, as well as the value of synergies from the transaction. ..The inclusion of 25% cash does not change this from being mostly a stock-for-stock transaction.
Earlier this month, Horizon Pharma submitted a written request to Depomed, Inc. to set a record date to determine shareholders eligible to request a special shareholders meeting. Additionally, Horizon Pharma filed a lawsuit in the Superior Court of California for the County of Santa Clara, challenging the legality of Depomed’s poison pill and certain of the bylaw amendments announced by Depomed’s board of directors on July 13, 2015.
Under Depomed’s charter and bylaws, shareholders owning 10% or more of Depomed’s common stock have the right to call a special shareholders meeting. Horizon Pharma, which currently owns approximately 1% of Depomed’s common stock, intends to solicit other shareholders to meet and exceed that threshold. At the special shareholders meeting, Depomed shareholders will be asked to consider two principal proposals:(1) the removal of all current Depomed directors, contingent on a new slate of directors being elected; and (2) series of amendments to the bylaws intended to reverse the changes made by the Depomed board that have the effect of disenfranchising shareholders and delaying or preventing the calling of a special shareholders meeting.
Horizon Pharma’s lawsuit alleges that Depomed’s recently adopted poison pill and bylaw amendments concerning the calling of special shareholder meetings, individually and collectively, violate the California Corporations Code and the fiduciary duties owed by the board to Depomed shareholders. The lawsuit seeks declaratory and injunctive relief to invalidate the poison pill and bylaw amendments and to prevent Depomed and its directors from entrenching themselves in office at the expense of Depomed shareholders, who, as a result of defendants’ illegal actions, will be denied the right to consider Horizon Pharma’s acquisition proposal.
On August 10, 2015, Depomed said in a US Securities and Exchange Commission (SEC) filling that it intends to file a revocation statement and revocation card with the SEC in connection with the proposed solicitation by Horizon Pharma to be able to call a special meeting of Depomed shareholders, In addition, following Horizon’s filing of a lawsuit against Depomed, Depomed’s filedof a lawsuit against Horizon. Depomed filed a complaint today against Horizon in the Superior Court of the State of California for the County of Santa Clara alleging that Horizon’s unsolicited bid to acquire Depomed was “predicated on the improper and unlawful use of highly confidential and proprietary information related to NUCYNTA, Depomed’s leading product. Depomed seeks through its complaint an injunction to prevent Horizon from continuing its improper and unlawful use of Depomed’s highly confidential and trade secret data, and to prevent Horizon from continuing to make and failing to correct its false and misleading statements in connection with its attempt to acquire Depomed, among other relief,” said Depomed in a statement issued August 3, 2015.
Depomed also specified in its August 3 statement that the Depomed Board will, no later than August 31, 2015, fix a record date to determine shareholders entitled to request a special meeting, as contemplated by the bylaws. Under the bylaws, the record date to determine shareholders entitled to call a special meeting shall be not more than 60 days after the date on which the Depomed Board takes action to fix the record date. The bylaws provide that any request to call a special meeting must, among other things, be signed by the holders of shares entitled to cast not less than 10% of the votes at such meeting and must be received by Depomed within 30 days after the specified record date.