Hedge fund urges Actelion board shake-up

ZURICH/LONDON Fri Feb 4, 2011 10:30am EST

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ZURICH/LONDON (Reuters) - Hedge fund shareholder Elliott Advisors called for Actelion to explore a possible sale, and for the Swiss biotech's chairman and chief executive to resign from the board.

Shares in Actelion rose more than 4 percent after it emerged Elliott had sent a letter, which said Chief Executive Jean-Paul Clozel's attitude to a potential sale of the company, worth around 6.7 billion Swiss francs ($7.10 billion), was not in shareholders' interests.

"We believe his public statements and apparent campaign to keep the company independent are wholly inconsistent with his position as a board member and the fiduciary requirements of that role, i.e. the protection of shareholders' best interests," Elliott wrote in a letter to Actelion.

Shares in Actelion have traded in a tight range since mid-November, when Clozel sought to quash takeover speculation, saying maintaining independence was the best way to ensure value for the company's shareholders.

Reuters obtained a copy of the letter, addressed to Actelion directors and sent from the London office of the New York-based hedge fund on Thursday. Elliott's move was earlier reported by the Financial Times.

The letter demanded chairman Robert Cawthorn and chief executive Clozel step down from the board.

For a full text copy of the letter, click

Elliott said management was not addressing concerns about Actelion's strategic direction and said the share price was too low. The hedge fund said it had a stake of nearly 6 percent in Actelion, up from just over 3 percent before Christmas.

"We have received the letter. The board is looking at it and will react when the time is right," Actelion spokesman Roland Haefeli said.

Elliott, a $17 billion hedge funds company based in New York, was founded by Paul Singer in 1977 and launched with just $1.3 million. Singer's son, Gordon, runs the firm's London office.

Elliott often takes on the role of an activist shareholder, and last year sought to buy business software company Novell

after building an 8.5 percent stake in the company.

Actelion and British partner GlaxoSmithKline last week dropped development of insomnia drug almorexant, a move some analysts said made Actelion more attractive as a takeout target, as the group no longer had to spend money on a project they said had a relatively low chance of success.

Rumors of a possible buyout buffeted the company's share price through the autumn, with the favorite mooted suitor being U.S. biotech giant Amgen and cash rich pharma companies including Bayer also in the mix.

UNLOCKING VALUE?

No offer for the company has emerged but many analysts think a sale to a large drugmaker is hungry to add new products would make sense. Takeout value estimates have been between $65-72.

"We believe that a takeover would release substantial value and we continue to believe that the risk-reward balance in Actelion is very attractive," said Kepler Research analyst Tero Weckroth.

Shares in Actelion were up 4.3 percent at 1021 GMT, outperforming a flat Stoxx European Healthcare index.

Some analysts worried this latest development could distract management and the board from running the business.

"For the company's operating business this (the Elliott proposal) is negative, but it is positive for the short-term share price development," said ZKB analyst Sybille Frick Bischofsberger.

"Speculation has been driving the share price, but if bids don't materialize then in the longer term the share price could slip back to the operating value," she said, adding that a hostile takeover would have little chance of success if management wanted to remain independent.

Actelion shares gained strongly in the final months of 2010 on talk the world's largest biotech company Amgen or others could be interested in making an offer for the Swiss company.

The group's efforts to reduce its dependence on key drug Tracleer, which treats a rare heart and lung disorder and rakes in more than $1 billion a year, have been thwarted by a string of setbacks.

Actelion management has continually said the company wants to remain independent.

(Additional reporting by Paul Arnold and Silke Koltrowitz; Editing by Dan Lalor, Ben Hirschler and Jane Merriman)

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