Starboard Value may have lost its first skirmish with Pfizer. But the activist investor has a track record of protracted, bruising fights for control of companies that’s likely to make it a formidable opponent.
The investor often goes up against big corporate targets, using deep research and caustic, detailed arguments to make the equity stakes it takes feel bigger than they are, according to people who have gone head-to-head with Starboard.
Albert BourlaOn Wednesday, Starboard is scheduled to meet with Pfizer CEO Albert Bourla and the company’s lead independent director Shantanu Narayen — the first time the company will likely hear, in detail, how Starboard thinks Pfizer should change. Starboard CEO Jeff Smith is then likely to take his broader case public a week later at a high-profile activist investor conference where he’s on the agenda.
Pfizer has yet to publicly comment. Starboard has a roughly $1 billion stake in the company, whose shares have fallen by more than half since the pandemic. The pharma giant has undertaken a series of cost cuts, changed out top executives, added to its pipeline through R&D, and closed or handed off other programs.
When Starboard does finally unveil its argument, it will likely pull no punches. The activist often begins with a detailed letter to a company’s board and management, outlining what it sees as failures. Then there’s a public presentation that can run more than 100 pages.
Jeff SmithOne person with experience taking on Starboard recalled the engagement being intense immediately. After Starboard took a stake, it presented to the company’s management team, but the two parties didn’t see eye-to-eye. The source said what followed was a public assault on executives through letters and slide decks, meant to apply pressure and gather other investors to the activist’s side.
To counter, the company targeted by Starboard had a presentation of its own, called the “fight deck.”
Starboard’s last pharmaceutical fight was with Bristol Myers Squibb, when it announced its opposition to the $74 billion takeover of Celgene. In a letter to the Bristol Myers shareholders, it trashed the deal as “poorly conceived and ill-advised.” It launched a legal demand for company records, and pointed out how its shares had badly underperformed the market.
“These results are not reflective of a management team and Board of Directors that has earned the right, in our view, to execute on a ‘bet the company’ acquisition,” the firm wrote. Aiding Starboard was the fact that one of BMS’ largest shareholders, Wellington Management, had come out publicly against the deal days earlier.
A scrupulous presentation followed, pulling data, securities filings and past comments by executives to paint the company’s CEO as ill-equipped for the moment.
While Starboard didn’t respond to a request for comment on its strategy, Pfizer can expect a similar treatment.
Another individual, who advises companies behind the scenes on activist defense and has gone up against Starboard before, described the firm as one of the most aggressive and tenacious activist firms, willing to engage in drawn-out, complex fights with companies. They described the investor as willing to quickly take its fights public and battle them out in the press to win the support of other shareholders.
Starboard failed to block Bristol Myers’ Celgene deal, which closed in November 2019. But it may have been proven right — while the S&P 500 has gained 133% since Jan. 2, 2019 (the day before the Celgene deal was announced), BMS’ shares are flat.
Other high-profile Starboard campaigns include Starbucks, Bloomin’ Brands (the parent company of Outback Steakhouse) and Rupert Murdoch’s News Corp.
It was victorious in a fight with Perrigo, an over-the-counter and generics drug manufacturer.
That battle, which started in 2016, centered on what Starboard called failures by management to sell the company, after Perrigo rejected an acquisition proposal from Mylan that was more than double the share price at the time of Starboard’s first letter.
“Unfortunately, since that time, results have gone decidedly in the wrong direction, and management’s promises have been woefully unfulfilled,” Smith wrote in September 2016.
Some five months later, Perrigo gave Starboard five board seats, two of which were filled by investors from the firm.
Drew Armstrong contributed reporting.