Acacia Research is proposing to install two of its own directors and axe the current chairman of Arix Biosciences, one of the biotech companies it snatched off of Neil Woodford’s former fund.
On Monday Acacia, which is currently working with Woodford on his comeback venture, requisitioned AGM resolutions to nominate a trio of directors to Arix’s board after calling out the London-listed biotech firm for its “history of governance instability”.
The US investor’s proposed board shake-up would see Peregrine Moncreiffe added to the board of directors, with the view of replacing current chair Naseem Amin, alongside Maureen O’Connell and Isaac Kohlberg. O’Connell is currently the chairman of Acacia’s own board, which Kohlberg also sits on as an independent director.
Acacia owns 19% of Arix, having acquired the stake in the bundle of biotech stocks it purchased off Link Fund Solutions from the collapsed Woodford Equity Income fund last June.
The company was not among the eight stocks in WCM Partners Healthcare, a biotech fund being launched by Woodford and Acacia as part of their new business venture. Though the pair had been hoping to set up shop in Jersey they have settled on the Cayman Islands instead following backlash from the Jersey Financial Services Commission.
Acacia calls out ‘uncontrollable board tumult’ at Arix
Since becoming a shareholder, Acacia has been outspoken about Arix’s perceived governance failings, including its poor record of engaging shareholders on remuneration issues.
Last month the US investor wrote to senior independent director Giles Kerr with a plan to improve governance at the company by replacing its current CEO and reconfiguring the board to include individuals who possess the “requisite experience and skills”.
Arix has seen massive turnover at the board level, with 18 different directors serving on its board over the past five years. This “seemingly uncontrollable board tumult” has “presaged instability in the executive ranks” and led to “dysfunction” in the investment team, prompting a number of senior members to depart, Acacia asserted in the letter to Kerr.
Until recently it seemed Arix was willing to cooperate, with Sky News reporting on Thursday it was on the verge of brokering a bilateral peace deal with Acacia.
But Portfolio Adviser understands the agreement was scuppered on Friday when a sole board member, independent director professor Trevor Jones, objected to the changes, leading to a standoff between the biotech firm and its biggest shareholder.
Appointment of two Acacia directors ‘unlikely to be palatable for shareholders’
Acacia’s board nominees will now be put to a shareholder vote at Arix’s AGM, which has been provisionally set for 19 May.
A source told Portfolio Adviser there was a good deal of investor support for Acacia’s proposals.
Under the reconfigured board Kerr would continue to serve as an independent director and Acacia has also proposed that Arix COO Rob Lyne join the board as an executive director.
However, analysts at Jefferies were not sure the appointment of two Acacia directors would go down well with shareholders.
“While the board is in need of both greater depth and a period of stability, Arix had already begun the (now paused) process of making additional appointments,” equity analyst Matthew Hose said in a note on Monday.
“Moreover, the level of board control arising from the appointment of two Acacia directors, plus the diminished biotech experience, is unlikely to be palatable for other shareholders, in our view.”
