Ironwood dodges activist board seat, but the investor still has words of advice

Ironwood has successfully fended off activist investor Alex Denner from joining its board, the company announced Thursday following a shareholder meeting. But Denner isn’t done giving out tips.

Denner’s company Sarissa Capital took a stake in Ironwood late last year, and soon after announced plans to snag a seat at the table. Ironwood $IRWD campaigned for shareholders to reject Denner earlier this month, although it first seemed open to the idea. Denner is probably best known as Carl Icahn’s protégé, with a history of spurring acquisitions of the companies in which he invests. He served as chairman of Ariad before Takeda acquired the cancer company for $5.2 billion last year. He was also a board member at Bioverativ before it was sold to Sanofi for $11.6 billion earlier this year. And he recently took control of The Medicines Co $MDCO amid considerable buzz.

But after three meetings with Denner to better understand his intentions for the company, Ironwood’s executives decided they weren’t thrilled with the prospect of him on their board. In a statement, the company said Sarissa hadn’t made a strong enough case to appoint Denner, considering the boards existing diversity.

Shareholders apparently agree, as they voted Thursday to appoint three independent directors who were up for re-election rather than bring in Denner.

“We look forward to continuing to engage with our shareholders as we seek to deliver on our 2018 goals and to execute on our intent to separate Ironwood into two focused and durable businesses each with substantial opportunity for long-term growth and value creation,” Ironwood said.

Under pressure from Denner to boost shareholder value, Ironwood said earlier this month it would soon split into two companies: spinning out a pipeline of early- and mid-stage drugs into a separate, publicly traded biotech company while keeping its marketed products and related development projects in house at a scaled down, and more profitable, mother company.

Denner thinks that’s a good idea and had more advice to offer. Just after Ironwood announced its board vote results, Denner released a statement of his own. He wants three things from Ironwood:

The two post-spinout companies should be completely separate entities without cross-ownership.
Each company should have modern, shareholder-friendly governance without classified boards, supervoting stock, etc.
Capital allocation should be optimal. For example, adding significant debt to one company to capitalize the other or an IPO of 20% of one of the companies in order to capitalize the other would destroy significant shareholder value.

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