If Allergan thought it could satisfy angry investors by splitting the CEO and chairman jobs after Brent Saunders leaves the company, it'll have to think again. Another prominent activist—John Chevedden—is joining forces with rebels at Appaloosa to push for an immediate split.
Appaloosa said Thursday that Chevedden is withdrawing his shareholder resolution for a job split and backing its own. Chevedden said in a statement that Appaloosa’s proposal is better for Allergan investors because it “contemplates immediate implementation upon approval by shareholders.”
After Allergan posted 2018 results last month, Appaloosa head David Tepper wrote to the company’s board urging a job split, citing the company’s "chronic underperformance." In their quarterly report, Allergan executives had outlined several challenges facing the company, including a $1.6 billion write-down for the chin-fat injection Kybella, a canceled sale of its women's health unit and competitive threats to top sellers.
Allergan’s shares sank 13% on the report. The stock is down almost 60% from a high in the summer of 2015.
Tepper wrote at the time that it “should by now be readily apparent to all interested and responsible parties that Allergan requires a fresh approach to its business strategy and an unbiased review of its capabilities, opportunities and way forward.”
Weeks later, Allergan said it would support a move to split the jobs—but not now. The company said it would consider the move when it makes its next CEO change. Tepper again blasted the company’s decision-making, saying the move "falls short of improved governance and once again lays bare your reluctance to hold management accountable for its dismal performance.”
Allergan said it "strongly" disagrees that an immediate separation of the roles is warranted. Such a change would be disruptive, Allergan said, while its proposal allows for a smoother transition. Allergan reiterated that message Thursday after Appaloosa's latest announcement.
Now, Tepper said his team is “gratified” that Chevedden agrees an immediate split is needed. Chevedden’s prior proposals on the issue won more than 42% of the vote by Allergan shareholders at 2016 and 2018 annual meetings, according to the partners.