Starboard Value Takes Aim at a New Activist Target, Plus All the Details on 3 Other Filings

According to a Schedule 13D filing, Jeffrey Smith’s Starboard Value LP owns a stake of 4.14 million shares in Depomed Inc. (NASDAQ:DEPO), which account for 6.8% of the company’s outstanding shares. However, the activist hedge fund has economic exposure to 5.97 million shares, which represent 9.8% of the company’s outstanding shares, as the fund has certain cash-settled total return swap agreements in place. More importantly, the activist filing reveals Starboard’s significant concerns regarding the company’s “serious corporate governance, deficiencies, questionable capital allocation decisions, and egregious actions” implemented by the company’s Board of Directors to hinder interest in acquiring the company, as well as subdue shareholder rights. Specifically, the New York-based hedge fund accuses the specialty pharmaceutical company of taking a “series of shareholder-unfriendly steps” to block Horizon Pharma PLC (NASDAQ:HZNP)’s attempts to acquire the company for at least $33.00 per share, a takeover offer that is significantly higher than Depomed’s current share price. Mr. Smith and his team also called into question the company’s proposal to change its state of incorporation from California to Delaware, a move that would suppress shareholders’ rights by eliminating the ability of shareholders to call a special meeting for the purpose of replacing Board members, as well as preventing shareholders from starting a special meeting request within 180 days of any annual meeting of shareholders. Starboard Value also voiced its plans to nominate a slate of director candidates in connection with its request for a special meeting of shareholders.

The shares of the specialty pharmaceutical company that focuses on pain and other central nervous system conditions have gained 13% in today’s trading session, primarily owing to the new activist campaign launched by the successful and feared activist fund. Depomed Inc. (NASDAQ:DEPO)’s management issued a rather concise statement in response to Starboard’s detailed 13D filing, which says: “Depomed welcomes open communications with its shareholders and values constructive input toward the goal of enhancing shareholder value”. The hedge fund sentiment towards Depomed declined notably in the December quarter, as the number of funds in our database with stakes in the company fell to 23 from 32 quarter-over-quarter. Richard Mashaal’s RIMA Senvest Management upped its position in Depomed Inc. (NASDAQ:DEPO) by 50% during the final quarter of 2015, ending the year with 4.13 million shares.

As revealed in a separate 13D filing, David Winters’ Wintergreen Advisers currently owns 1.54 million shares of Consolidated-Tomoka Land Co. (NYSEMKT:CTO), which constitute 26.1% of the company’s outstanding shares. While the investment firm’s stake has not undergone any changes since the fund’s previous 13D filing on the company in early January, Wintergreen Advisers reveals in the new filing how it plans to vote certain items in the company’s 2016 Definitive Proxy Statement. Wintergreen Advisers intends to vote against the re-election of the current slate of seven directors, against the appointment of Grant Thornton as auditor (as the firm’s audit fees have doubled over a two-year period), against the approval of executive compensation and against the issuance of additional shares. However, the investment firm plans to vote for the hiring of an advisor that would explore strategic alternatives to unlock shareholder value, which includes the possibility of liquidating assets or selling the entire company. Wintergreen Advisers put particular emphasis on the real estate operating company’s proposal regarding the issuance of additional shares, saying that the proposed issuance intended to meet current payment obligations to bond holders could dilute existing shares by more than 23%. Instead, Mr. Winters and his team recommends Consolidated-Tomoka Land Co. (NYSEMKT:CTO) liquidate some assets to raise the much-needed cash for deleveraging the company’s balance sheet. The shares of the diversified real estate operating company that owns and manages commercial real estate properties have plummeted by 19% in the past 52 weeks. There were 12 money managers that we track with stakes in the company on December 31, with them owning 34% of its outstanding shares. Michael Reeber’s Andalusian Capital Partners had nearly 175,000 shares of Consolidated-Tomoka Land Co. (NYSEMKT:CTO) in its portfolio at the end of December.