Proxy challenger stiff-arms Vivus offer to split board control, replace CEO

Is that your final offer, Vivus? Proxy challenger First Manhattan Co. has nixed the drugmaker's latest bid to settle their increasingly bitter fight for control. Apparently, FMC prefers to wait for tomorrow's shareholder meeting--and the results of the director election.

On the table was an offer for split control of the Vivus board--and an agreement from CEO Leland Wilson to step aside. Vivus ($VVUS) would have four seats; FMC would have four; and the remaining slot would be filled by an investor rep. The newly selected CEO would occupy one of FMC's spots, but it's unclear whether that CEO would be FMC's hand-picked candidate, the former AstraZeneca ($AZN) EVP Tony Zook.

According to Vivus, FMC rejected the offer immediately. "It is our desire to end this closely contested proxy battle without handing the company over to [FMC chief] Mr. [Sam] Colin ahead of the vote," Wilson said in a statement. "We believe our proposal, which included my stepping down as CEO of Vivus, was extremely fair and balanced. We are very disappointed with his complete rejection of our proposal."

The investment firm, which holds some 9.9% of Vivus shares, may be confident that it would get a better deal from the shareholder vote. Yesterday, FMC sued Vivus for delaying the annual meeting to tomorrow from Monday, accusing Vivus of "moving the goal post" because it didn't like the way proxy votes were stacking up. Vivus wanted more time to solicit supporters, FMC said.

Vivus' latest announcement included a plea for proxy votes, but so did FMC's Iatest. The company said it would invite three Vivus directors to join a "newly reconstituted board" if all of FMC's nominees are elected. The firm "continues to seek a settlement ... despite the bad faith negotiating tactics" of Vivus's board, the statement said.

The split-control offer is the best proxy deal we've seen lately, so Vivus's leadership may be running scared ahead of tomorrow's vote. We'll find out then whether that concern--and FMC's apparent confidence--are justified. Unless a last-minute settlement comes through, that is.

- here's the Vivus statement
- check out the FMC release