Proxy Contests - A Reflection After 18 Months Mark G. Foletta Sr. VP & Chief Financial Officer Amylin Pharmaceuticals, Inc.
Key Observations 2 4-5 month process for us – a HUGE time sink that can cost several million dollars Establish a qualified team of advisors and internal people Focus the leadership team on running the business Establish the best Corporate Governance policies well before you have an activist in your stock Remember…this is an election
Overview of Presentation 3 Investor Considerations Internal and External Team Process Key Learnings
Investor Considerations 4 Road Show Meetings and Presentation Challenges Facing Investors Record Date Issues Index Funds
Road Show Meetings and Presentation 5 Different than a typical investor interaction Corporate Governance issues Respond to dissident arguments From investors, legal/proxy attendees as well as PM and analyst From Company, Board attendees to show strength, experience and commitment Presentation needs to be clear, concise and impactful Many investors will just review on the web
Challenges Facing Investors 6 Difficult for some investors to vote against proxy governance services (Risk Metrics, Glass Lewis, etc.) Internal policies make it time consuming Decision sometimes made by other than PM Understand leverage points and decision maker within the institution (proxy solicitor can help) Busy time – they have hundreds of proxies to vote!
Record Date Issues 7 The investors who held your stock on the record date matter (even if they subsequently sold) If investor is out of stock after record date, they may be unwilling to take a meeting, and may not be sympathetic to your cause Stock surveillance service is critical to help determine who held at the record date
Index Funds 8 Don’t forget them! They will meet with you and they will engage around the issues and make a decision
Internal & External Team 9 Investor Relations Public Relations Proxy Solicitor Legal Finance/Investment Banker
Investor Relations 10 First line contact with investor community Provide insights to investor perceptions Prepare the road show presentation This will tax your IR team Use stock surveillance service to assist Analytics around ownership and scenarios around voting
Public Relations 11 Very important Media often takes an interest in proxy contests – especially if a serial activist is involved Manage multiple “news events” as there are many public filings (DEF 14A) that may result in a media inquiry…and you can’t always predict when they will occur Drive to respond with company statement(s) in same news cycle as activist(s) Results in accelerating pace best managed by specialist PR agency
Legal 12 Manage preparation of proxy statement and other filings Manage external advisors and Board Manage potential litigation
Finance/Investments Bankers 13 Many Banks have specialists that focus on activists and proxy fights They have relationships with Proxy Solicitors and Stock Governance Services Financial analysis around possible business proposals proposed by dissident Peer financial comparison Reduce expenses Sell off divisions An external advisor can enable your internal Finance team to remain focused on the business
Proxy Solicitor 14 Critical function Intelligence around how funds vote and funds that tend to follow activists Information useful in setting road show schedule
Fight Letters 16 Necessary, but not a value add Targeted more to retail investors and the media than institutional holders They take a lot of time!
DEF 14A’s (Technical Term for SEC Proxy Filings) 17 Everything you mail or present to investors requires a filing Typical proxy season has 1-2 filings Proxy contest requires many more In our fight, there were 73 filings! (including Company and Dissidents) They are all public and subject to investor/media scrutiny
Stock Governance Services(Risk Metrics, Glass Lewis, etc.) 18 They have a lot of influence They don’t spend a lot of time Mostly focused on stock performance Less focused on drivers of stock performance Generally supportive of investors having board representation in proportion to their ownership Often take a “split the baby” approach
Key Learnings 19 Good corporate governance matters Don’t wait until you have an activist in your stock Determine what you can accept and consider settling before proxy materials are printed If you engage in a contest, be prepared to go all the way and to spend several million dollars Get good advisors – but be careful of advice from those that don’t have to live with the consequences! Focus your leadership team on running the business