Genzyme (NASDAQ: GENZ) has averted a proxy fight with activist investor Carl Icahn (photo) by giving two board seats to his allies. The last-minute deal--just a week before the annual meeting on June 16--gives Icahn half the board seats he had sought. And it gives Genzyme some closure as it struggles to address its problems.
Icahn reps Steven Burakoff and Eric Ende will be appointed to an expanded Genzyme board. And they'll join two other board members brought into the fold because of shareholder dissent. Relational Investors' Ralph Whitworth, who had threatened a proxy fight of his own, reached a deal with Genzyme in April; both Whitworth and ex-Amgenite Dennis Fenton are stepping onto the company board as a result of that agreement.
Genzyme chief Henri Termeer (photo) and Icahn both hailed the agreement, as you might expect. Termeer called it a "pragmatic and constructive solution;" Icahn said, "New oversight at the director level will help this great company achieve its full potential." But others also greeted the arrangement warmly: "It avoids a continuing confrontation with Icahn," First Empire Asset Management's Michael Obuchowski tells Reuters, "and provides more oversight over the direction the company takes."
And the company definitely needs direction. Genzyme has been fighting manufacturing snafus since last year, when a key plant in the Boston area was found to be contaminated with a virus. The cleanup spawned shortages of some of the company's drugs, allowing new competitors to get a foothold in the market. Now, the company is operating under an FDA consent decree after agreeing to pay a $175 million fine.
ALSO: One of Genzyme's dissatisfied institutional investors is now saying that the biotech giant's embattled CEO Henri Termeer ought to be given another chance. Report