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Shares of specialty drugmaker Depomed ( DEPO ) jumped Friday after an activist investor took a stake in the company and challenged the management. Starboard Value LP, which has led high-profile efforts to shake up Darden Restaurants ( DRI ) and Yahoo ( YHOO ), announced that it had acquired a 9.8% stake in Depomed and sent a scathing letter to the company’s CEO, James Schoeneck, and the board of directors. “Specifically, we have significant concerns regarding serious corporate governance deficiencies, questionable capital allocation decisions, and egregious actions taken by the board to stymie strategic interest in acquiring Depomed,” wrote Starboard member Jeffrey Smith in the letter. The last item referred to the board’s poison-pill provision adopted last year when Horizon Pharma ( HZNP ) attempted a hostile takeover, which was ultimately foiled . That seemed to be at the root of Starboard’s complaint, and Smith charged that Depomed’s board is making further moves to limit shareholder power. Smith cited a proposal to reincorporate Depomed, currently headquartered in Newark, Calif., in the state of Delaware, mentioned in the recent notice of the annual shareholder meeting to be held May 18. “Upon further review, we identified unconventional provisions that indicate management and the board are using the reincorporation proposal as a tactic to further entrench themselves by suppressing shareholder rights that currently exist under Depomed-California,” Smith wrote. Starboard filed a Record Date Request Notice asking to call a special shareholder meeting. Depomed issued a brief response saying that the company “welcomes open communications with its shareholders” but that it hadn’t received any communication from Starboard before the letter. It urged shareholders to take no action. The moved came three days after Smith resigned as chairman of Darden Restaurants, a position he gained in 2014 after leading a similar, successful fight to replace Darden’s board. Starboard is also currently attempting to replace the board of Yahoo. Depomed stock shot up more than 12% in morning trade on the stock market today , near 17. The stock had been trading for less than half its 52-week high — 33.74 back on July 21 — an unusually big drop, even by drug stock standards. Yahoo stock rose fractionally intraday, while Darden Restaurants was little changed. Scalper1 News
Scalper1 News