Activist targeting Knight Therapeutics hasn't made sufficiently strong enough enough case for change of control, advisory firm says

Activist targeting Knight Therapeutics hasn't made sufficiently strong enough enough case for change of control, advisory firm says

- in Investing

A major shareholder advisory firm weighed in about the proxy fight at Knight Therapeutics Inc. on Thursday, arguing the fact that clients are flawed, but that this activist leading the charge about the current board of directors hasn\’t already made a sufficiently strong enough enough case to warrant a modification of control.

The report by Institutional Shareholder Services (ISS), links in advance of a shareholder vote scheduled for May, noted which the Montreal-based pharmaceutical company has vastly underperformed its competitors and this its shares were trading at liquidation value. In addition, it flagged potential governance issues. These 4 elements, however, cant be found enough for ISS to affiliate with Meir Jakobsohn, the CEO of Israel-based Medison Biotech Ltd. — and even suggest that he take a seat on Knight’s board.

Medison, which owns 7.3 per-cent of Knight’s shares, launched a proxy fight in March after accusing Knight CEO Jonathan Goodman of having conflicts appealing in addition to deploying an ultra-conservative business strategy. Knight has responded by nevertheless the proxy fight can be a conduit for Jakobsohn to get power over the organization and its millions in cash to enhance Medison.

In its report, ISS said that Medison highlighted legitimate concerns about Knight but warned shareholders about siding with these, recommending them to only vote in favour of two nominees from Medison’s slate of proposed directors and six from Knight’s.

“The dissident did not complete a compelling case for board control,” the report said. “Moreover, the dissident’s go-forward plan, if fully instituted, may expose the business, that has been very deliberate about deploying its capital, to significant risks.”

In a release, Medison wouldn\’t address the concerns ISS had about Jakobsohn. Instead, it highlighted just how the advisor determined that Knight was underperforming as well as the require some changes in the company.

“Without real change, there are little hope that Knight is ever going to be worth more versus the cash and financial assets on its balance sheet,” Jakobsohn said.

ISS did raise questions on the makeup of Knight’s current board, which merely has a board independence of 57 percent when compared with a mean of 80 per cent for folks from the S&P/TSX Composite Index. The advisor highlighted Knight president and chief financial officer Samira Sakhia and Jakobsohn as a couple of the three non-independent members and encouraged shareholders to withhold votes upon.

Instead, ISS recommended that shareholders elect Elaine Campbell and Christophe Robert Jean, two Medison nominees with significant pharmaceutical experience at AstraZeneca and Novartis, respectively.

It’s “highly unusual” for the CFO to take a seat within the board of any company it really is a portion of the S&P/TSX Composite Index, ISS said. Sakhia’s presence about the board may also impact independent oversight of management, the advisor added, because she’s worked alongside Goodman for 18 years.

To ISS, Jakobsohn’s place on the Knight board is “problematic” and possesses “brought about a definite amount of dysfunction,” the report said, as a consequence of his ongoing conflict with Goodman. ISS also questioned Jakobsohn’s motivations for launching the proxy fight, concluding that Knight’s state that he must use their cash to solely benefit Medison “will not appear unfounded.”

“Jakobsohn’s agenda carries significant risk and also appear to be aligned with all the company’s original strategy, therefore most likely are not aligned with shareholder expectations,” the report said.

In a statement towards Post, Knight spokesperson Ian Robertson said the report “validates” the company have been meeting up with its shareholders.

“Knight gains advantage from the leadership of Jonathan Goodman … not really a Knight controlled by Meir Jakobsohn, his nominees with no entrepreneurial pharma experience, along with his risky scheme to risk Knight’s cash.”

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