Genzyme has forged a peace treaty with the billionaire shareholder Carl Icahn, after months of debate about the future of the embattled company. Cambridge, MA-based Genzyme (NASDAQ:GENZ) has agreed to appoint two of Icahn’s associates to its board in return for Icahn’s support for Genzyme’s nominees, the company reports this morning.
Icahn, who controlled 4.9 percent of Genzyme’s stock as of May 4, will now vote all of his shares in favor or Genzyme’s 10 nominees at its annual meeting next week on June 16. That includes Genzyme’s leader of the past 25 years, chairman and CEO Henri Termeer, who Icahn previously wanted to oust from the board. Genzyme’s board will then appoint Icahn’s two associates, Steven Burakoff and Eric Ende, who are physicians by training, to serve as directors after the annual meeting. They aren’t the only new blood in the Genzyme boardroom. On Monday, the company said it would add Dennis Fenton, a former Amgen executive, to board after the meeting. And Genzyme previously reached an agreement with San Diego-based activist investor Ralph Whitworth to provide him with a seat at the table. So the board, which now has 10 members, would grow to 13 members after next week’s annual meeting.
It’s tough to say whether Icahn or Termeer won this round. Icahn had originally sought to win four of 10 seats on the Genzyme board. His original nominees included himself, Burakoff, Alex Denner, and Richard Mulligan. Now he’s settling for two seats on a board that is expected grow to 13 members. Yet Icahn said in a statement that he supports the nomination of Fenton, whose background in operations at Amgen will bring some much-needed bio-manufacturing expertise to Genzyme. The whole proxy fight, after all, was sparked by expensive mishaps at Genzyme’s drug plants in Allston, MA, and in Ireland over the past year. Icahn also noted in today’s joint statement from Genzyme that Whitworth was a good addition to the board.
“I am always pleased when a proxy fight can be avoided,” Icahn said in a Genzyme-issued statement. “New oversight at the director level will help this great company achieve its full potential.”
Still, the agreement effectively dilutes the power of individual directors because it expands the number of seats on the board by two. (Genzyme revealed earlier this month that it would grow the board from 10 directors to 11 with the addition of Fenton.) Termeer, if shareholders re-elect him to the board, gets to remain a director.
Genzyme can claim some degree of success in that it is keeping Denner, an Icahn fund manager, and Mulligan, the Harvard genetics professor, off the board. Genzyme had argued that Denner and Mulligan would have a conflict of interest as board members because they already serve as directors of Cambridge, MA-based Biogen Idec (NASDAQ:BIIB), and both Biogen and Genzyme develop drugs for multiple sclerosis. Biogen is the world’s largest provider of MS drugs. Genzyme is developing alemtuzumab (Campath) for patients with the neurodegenerative disease.
We’ll update this story as appropriate. Here’s our recent feature that chronicles Icahn’s battle for more control of Genzyme and the company’s manufacturing woes.
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