Allergan taps Celgene vet Hugin for M&A guidance, but proxy brawlers aren't impressed

Troubled Allergan is taking steps to appease investors, including bringing in a big-name biotech exec for guidance. But not everyone is impressed.

In a Friday proxy filing, the company said it had drafted former Celgene CEO and M&A engineer Bob Hugin to head up a new deal-focused committee. Three current board members will round out the panel, which Allergan says will “provide focused oversight on mergers, acquisitions, divestitures and other transactions.”

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The company also revealed that it had slashed the compensation handed out to CEO Brent Saunders—who currently holds both the company’s CEO and chairman roles—to $6.6 million for 2018, a dire year for the company. That's less than one-fourth the $32.8 million he garnered in 2017.

But some investors—particularly activist hedge fund Appaloosa, which has called for an immediate split of Saunders’ leadership positions—weren’t happy with the moves, and one key reason was Allergan’s unwillingness to strip Saunders of some of his duties.

At Allergan’s annual meeting, shareholders will weigh a proposal to require an independent board chairman “with immediate effect,” its proxy said. But as Credit Suisse analyst Vamil Divan pointed out in a note to clients, the proposal is non-binding, and “even if the proposal is immediately adopted, the actual separation of the roles would happen at the time of the next CEO transition, with no details on when that might actually be,” he wrote.

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The fund wasted no time in blasting the company after its disclosures, calling the moves “no more than a meaningless series of gestures intended to preserve the current system of lax oversight and further entrench management.”

“Typical of this board, Allergan has done everything except what needs to be done to fix the company,” it said in a statement, adding that “we are confident that shareholders will recognize these half-measures for what they are—a weak attempt to placate discontent and avoid a well-deserved rebuke to management.”

And analysts agreed the struggling company could face more dissent ahead of the May 1 meeting.

Allergan’s actions so far “may not be enough,” Divan, adding that, “we wonder if investors who have been frustrated with the team and the stock's performance will be satisfied” with a split not happening until Saunders leaves the CEO slot.

RBC Capital Markets’ Randall Stanicky agreed in his own note to clients, writing that “potential for other shareholders to take a more vocal stance ahead of May 1 remains.”

Meanwhile, though, Divan did see the formation of an M&A committee as a positive, especially in light of a string of deals that have left investors disappointed—such as the company’s $2.1 billion pickup of Kythera, maker of chin-fat dud Kybella.

“With four independent, well-respected and recently appointed directors assigned to this Committee, we believe investors should be pleased with this step that the company is taking,” he wrote.