Boardroom Coup

Turbulent Times Ahead for Stada

ARCHIV - Arzneimittel-Produktion beim Pharmakonzern Stada im hessischen Bad Vilbel (Archivfoto vom 21.01.2004). Der Pharmakonzern stellt am 12.05.2016 seine Zahlen für das erste Quartal vor. Foto: Frank May/dpa +++(c) dpa - Bildfunk+++
A Stada production line.
  • Why it matters

    Why it matters

    The latest board reshuffle at Stada did not go as far as some shareholders wanted. More infighting looms in the company’s leadership, amid shareholder worries about continuity as well as conflicting concerns over management stability and accountability.

  • Facts

    Facts

    A slim majority of shareholders voted to ouster Stada supervisory board chairman Martin Abend.

    Carl Ferdinand Oetker, of the Oetker foodstuffs dynasty, will replace him.

    Investors AOC had wanted Eric Cornut, a former manager at Swiss pharma group Novartis, to become the new chairman.

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    Audio

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After a marathon 13-hour session, German generic drugmaker Stada emerged from its annual general meeting with a new supervisory board chairman.

It was a close call: despite general dissatisfaction, only 55 percent of shareholders voted to get rid of Martin Abend.

The change was a key demand from the critical investor Active Ownership Capital. AOC wanted him to be replaced by the former manager of ethics and compliance at Novartis, Eric Cornut.

But in the end shareholders balked, and appointed Mr. Abend’s deputy, Carl Ferdinand Oetker, as chairman.

The shake-up on Friday has opened the way for restructuring at Stada. Five new board members were elected. Restrictions on share transfers were abolished, as AOC had demanded. Share transfers no longer need to be approved by the board. That measure strips away a condition that could theoretically have protected the firm against a takeover.

The abolition of transfer restrictions, and the replacement of Mr. Abend were among the key demands that AOC made in May.

The 13-hour slugfest between management and shareholders culminated in a complicated and controversial voting procedure. There were even fears the matter wouldn’t be concluded.

“We all agree that we want to move down the path to renewal within the company, with the correct measures and at the correct pace. ”

Carl Ferdinand Oetker, Chairman, Stada

During the debate it became clear that despite the harsh judgement of Mr. Abend, shareholders were afraid that voting him off the board altogether would be too dramatic a break in continuity.

“Why now, suddenly?” was the question on the minds of many shareholders regarding the restructuring that Mr. Abend and the company’s chief executive, Matthias Wiedenfels, have been pushing for the last two months, in the wake of the AOC campaign.

One of the accusations leveled at Mr. Abend is that for years he allowed the former chief executive, Hartmut Retzlaff, to to draw an exaggerated salary (€2 million or $2.2 million) and to build up a pension fund worth €32 million ($35.8 million).

“That’s enough, Mr. Abend. It’s time to plan for your successor,” said Winfried Matthes of investment company Deka.

But AOC didn’t get everything it wanted. The other four new board members were all nominated by Stada management. And the new chairman will not be not Mr. Cornut, as AOC wanted, but Mr. Oetker, who already sits on Stada’s supervisory body.

“We all agree that we want to move down the path to renewal within the company,” Mr. Oetker said, “with the correct measures and at the correct pace.”

AOC greeted the decision to replace Mr. Abend.

“The Stada shareholders have called unambiguously for a renewal at the top, which will bring changes to the corporate governance,” the AOC co-founders Florian Schuhbauer and Klaus Röhrig explained.

Abend Stada_stada
Martin Abend, ousted board chairman. Source: Stada

 

The fact that three of four shareholders voted down the company’s proposed management remuneration scheme was also seen as an important step forward.

Shareholder law experts say the result is a clear signal that critical investors can use their votes to exert significant influence on the outcome at shareholder meetings.

Aside from Mr. Cornut, the new faces on the supervisory board include former Amgen manager Rolf Hoffmann, the Aenova chief operating officer, Birgit Kudlek, Opel marketing chairwoman Tina Müller and Gunnar Riemann, who led the environmental sciences division at Bayer Crop Science.

Mr. Hoffmann and Ms. Müller, who had AOC’s backing, each received around 99 percent of votes. By contrast, Ms. Kudlek and Mr. Riemann didn’t receive majorities in the first round of voting and in a crucial vote were pitted against AOC candidates – who had also failed in their first attempt. As a result, infighting around the Stada leadership is likely to continue, particularly concerning these two appointments.

AOC says the vote outcome for Ms. Kudlek and Mr. Riemann is questionable and wants to take legal steps against the decision.

AOC co-founder Florian Schuhbauer accused Mr. Abend of the worst corporate governance in a German firm since Volkswagen’s management scandals.

26 p26 Stada in Numbers-01

At the same time, the debate showed that German shareholders and shareholder representatives regard the attack from AOC with a good deal of mistrust. Peter Barth of the German Society for the Protection of Securities Owners described the attacker as “a white knight with his visor down.” It’s not clear if the AOC candidates, who come mainly from the management ranks of Novartis and Hexal, are truly independent.

Mr. Schuhbauer is trying to defuse these suspicions, as he is trying to allay fears that AOC ultimately plans to sell Stada, or break it up. He’s trying to push the narrative that AOC is no activist investor, but rather an active owner that wants to steer Stada and see it grow in the long term. Stada could reach a market value of €10 billion ($11.2 billion)

According to information from the financial sector, AOC has secured particularly strong support from U.S. and British investors. Among these shareholders, there had been growing frustration concerning Stada’s governance and performance.

Siegfried Hofmann reports on the pharma industry from Frankfurt. To contact him: hofmann@handelsblatt.com

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