Proxy firms back Allergan in fight against Appaloosa

By Svea Herbst-Bayliss and Manas Mishra

(Reuters) - Two leading shareholder advisory firms threw their support behind Allergan Plc's management by recommending that investors vote against billionaire investor David Tepper's proposal that the Botox maker immediately split the roles of chief executive officer and chairman.

The recommendations of Institutional Shareholder Services LP and Glass Lewis & Co against the proposal by Tepper's hedge fund Appaloosa LP give critical support to Allergan Chairman and CEO Brent Saunders before the drugmaker's shareholder meeting on May 1.

"Their recommendations affirm our position that our plan to adopt separate Chair and CEO positions with the next leadership transition is the best approach for Allergan shareholders," Allergan said in a statement.

The two sides have been feuding over when the role of board chairman should be moved to someone who is not running the company as CEO. Tepper wants it to happen immediately while the company said it would occur at the next management change.

The hedge fund said on Monday it was baffled by the ISS recommendation.

The drugmaker's board has "presided over a failed strategic review, a questionable business strategy and excessive compensation packages, and have exhibited a disregard for sound corporate governance practices," Appaloosa said in a statement. "Without immediate change to Allergan's leadership structure, the status quo could remain in place for many years."

The statement suggests that Appaloosa will continue to fight the company and urge investors to back its plan. So far the hedge fund has lined up support from some large investors.

Artisan Partners, one of Allergan's top 10 shareholders with 6.4 million shares, and hedge fund manager John Paulson's Paulson & Co, which owns 1.6 million shares, are both backing Appaloosa, sources familiar with each of the firms' thinking said.

Artisan did not respond to requests for comment. A Paulson spokeswoman declined to comment.

Both the proxy firms said an immediate separation of the roles was not necessary.

ISS said in its recommendation that while Appaloosa had "raised a number of valid concerns regarding the company's long-term performance and board oversight of 'strategic missteps', there are no significant concerns regarding the board's current leadership structure sufficient to suggest that an immediate split of the CEO and chairman roles is warranted at this time."

Allergan, under pressure to rescue the company's falling stock price, launched a review of its strategy last year. But that review is only likely to result in the sale of its relatively small infectious disease unit.

Appaloosa has voiced its discontent with the results of the review, and has called for a breakup or sale of the company, citing recent clinical failures such as that of its depression treatment rapastinel.

Allergan's shares have fallen about 12 percent in the past 12 months. They trade nearly 60 percent below their record high of $340.33 in 2015.

(Reporting by Svea Hervst-Bayliss in New York and Manas Mishra in Bengaluru; additional reporting by Michael Erman in New York; editing by Maju Samuel and Richard Chang)

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