DellaCamera Claims Enzon CEO Can (Almost) Never Be Fired

June 10, 2009

DellaCamera Claims Enzon CEO Can (Almost) Never Be Fired

DellaCamera Capital gathered what it claimed was more than 50 percent of Enzon’s shareholders into a hotel conference room in Midtown New York today to make the case for staging a coup against CEO Jeff Buchalter.

The presenter, DellaCamera research chief Richard Mansouri, dropped some interesting new nuggets into the debate over whether Buchalter should be removed by his shareholders (the stock is down by more than 50 percent over the last five years). Among them:

* Buchalter’s contract requires an unusual 12 months’ notice if the company wants to fire him — and as he’s also contractually required to be Enzon’s board chairman, it is thus virtually impossible for the board to remove him. “We’ve never seen anything like this,” Mansouri said. While dual CEO/chairman roles often create unaccountable “imperial” bosses with built-in conflicts of interest, “The fact that it is contractually mandated is even worse,” he said. Buchalter gets about $5 million a year in compensation even though his company only makes $197 million in revenues.
* Buchalter announced he was exploring the sale of his specialty pharma division in August 2008, and then concluded that effort with no sale in November. No explanation or detail has been offered as to exactly why that effort failed, Mansouri said. “We are not at all satisfied with this lack of information.”
* Enzon has gone through $55 million in “other” R&D costs on “discontinued” products since 2005, and that “other” expenses are the company’s largest R&D cost.

“Something is wrong. Something is very wrong here,” Mansouri concluded.

The audience was subjected to this PowerPoint slideshow, much of which rehashed the case for change that Ralph DellaCamera’s (pictured above) group previously made in a June 1 SEC filing. Get BNET’s take on the back story here.

The chief weakness in the DellaCamera case is that the group won’t say who it thinks should replace Buchalter (pictured below) and nor will it reveal what it believes the company’s strategy should be. “We don’t have any other agenda,” Mansouri said.

This hole will become more important as it gathers shareholder support, because despite its flaws Enzon isn’t a complete disaster: It made $6 million in profit on $48 million in revenue in Q1, both small increases from the year before. Shareholders faced with a stay-the-course plan from Buchalter and no plan at all from DellaCamera might be forgiven for sticking with the devil they know.

In the wings is Carl Icahn, who owns 7.8 percent of Enzon. Icahn just succeeded in putting two supporters on Biogen’s board and two on Amylin’s board. He already has one guy on Enzon’s board.

The event set the stage for an exciting battle, but don’t get too excited: When pressed by BNET, Mansouri all but admitted that the historical success rate of shareholder votes to remove CEOs is zero.

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