Depomed (DEPO) Attracts Activists - Mizuho

Mizuho analyst, Irina Koffler, noted that activist fund, Starboard Value, has disclosed a 6.8% stake in DepoMed Inc (NASDAQ: DEPO) (but has economic exposure to 9.8% of the outstanding shares). In its 13-D filing, Starboard makes a number of allegations, including: 1) Depomed has serious corporate governance deficiencies; 2) its Board took egregious actions to impede strategic interest from acquiring the company; 3) the company may be suppressing shareholder rights (new language in DEPO's Reincorporation Proposal would make it extremely onerous for shareholders to call a special meeting).

Starboard seeks to call a special shareholder meeting and to remove and replace the DEPO Board. The analyst thinks that this event and anticipation of next steps could lead to positive momentum in the stock, and furthermore, shield DEPO from any potential weakness associated with its 1Q:16 earnings report.

The analyst thinks Starboard sees potential for multiple bidders on DEPO, but is most focused on Horizon (NASDAQ: HZNP) revisiting last year's bid. Horizon management have emphatically denied any interest in DEPO but she admits she may have an incomplete picture of the situation. The two companies are still embroiled in two ongoing lawsuits stemming from Horizon's 2015 attempt to acquire Depomed, which suggests that Horizon could have some residual interest in DEPO, and now may be able to acquire the company for a lower price.

The Neutral rating and $14 Price Target are under Review.

For an analyst ratings summary and ratings history on DepoMed Inc click here. For more ratings news on DepoMed Inc click here.

Shares of DepoMed Inc closed at $15.00 yesterday.

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