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  • Ramius LLC considering next move in SurModics turnaround
    Your move, Ramius.

    The alternative investment firm and activist shareholder purchased a 12 percent stake in SurModics Inc. (NASDAQ:SRDX) because it saw a clear opportunity to boost the stock and turn a nice profit. In its quest to name three people to the SurModics board, Ramius said it did not want to break up the company or replace the board.

    That may no longer be the case.

    Earlier this week, SurModics named former Arizant Inc. CEO Gary R. Maharaj as its top executive after pushing out Bruce Barclay in June. More importantly, Surmodics, based in Eden Prairie, Minnesota, said it hired Minneapolis investment bank Piper Jaffray & C0. to explore the sale of its pharma unit.

    So how will the investment firm respond? I can’t imagine it’s too pleased. Ramius said it wanted to help choose the next SurModics CEO. SurModics lacked a permanent leader for six months and then named one just a few days after Ramius filed its proxy statement? That’s one heck of a coincidence.

    A potential sale of SurModics’ drug business poses a trickier question for Ramius. Ridding pharmaceuticals unquestionably saves SurModics much-needed cash. Ernest Andberg, an analyst with Feltl & Co. in Minneapolis, estimates the company’s new $40 million plant in Alabama requires $10 million a year to run.

    Since SurModics said it would explore a sale Tuesday, the company’s stock soared about 20 percent to $12.40 before falling back to $11.50. Andberg thinks Wall Street has now fully priced the value of a potential sale into SurModics stock.

    SurModics stock closed at $9.03 per share on November 11, the day Ramius purchased two million shares, according to documents filed with the Securities and Exchange Commission. If Ramius elects to sell now, the firm could walk away with a $5 million profit.

    Here’s the big question: is there a reason for Ramius to hang onto its shares? That depends on whether Ramius thinks it can wring more value out of SurModics. With pharma out of the picture, the only way Ramius can push SurModics stock to, say, $20 a share in the immediate future is an outright sale of the company, Andberg believes.

    But for Ramius to do that, the firm may have to replace SurModics’ board, which probably would resist selling the company.

    Sell or attack? Decisions, decisions.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Dec 18 9:03 AM | Link | Comment!
  • SurModics, Ramius proxy fight is downright tame, if it is a fight
    As proxy fights go, the battle for SurModics Inc. (NASDAQ:SRDX), based in Eden Prairie, is downright tame — for now.

    Last week, Ramius LLC, the alternative investment firm of Cowen & Co. that recently purchased a 12 percent stake in SurModics, named its three candidates to the board of directors, according to documents filed with the Securities and Exchange Commission.

    Ramius asked investors to elect Dr. David Dantzker, a partner with venture capital firm Wheatley Partners, Jeffrey Meckler, managing director of biotech consulting firm Andrea Group, and Ramius partner managing director Jeffrey Smith.

    While Ramius strongly criticized SurModics’ performance of late, the firm told shareholders it only seeks to “help,” not usurp the board.

    “We are not seeking control of the Board of Directors,” the SEC documents say. “However, we hope that this election contest will send a strong message to the remaining incumbent directors that shareholders are not satisfied with the Company’s poor operational and stock performance, and that operational and strategic changes are required now.

    “We believe management and the Board need assistance in determining the right strategic direction for the Company and the right path forward to improve shareholder value,” according to the documents. “Our nominees have the necessary experience and desire to work constructively with management and the Board to address these issues.”

    As for Surmodics, the company released a statement Monday that said little other than it will offer a response once it files its official proxy statement.

    “SurModics’ Board of Directors and management team are committed to acting in the best interest of the Company and all SurModics shareholders,” the company’s statement said. “We have had an open dialogue with Ramius, as we do with all SurModics shareholders, since they first invested in our Company. SurModics’ Board is actively engaged in the strategy of the Company and is committed to building value for all shareholders.”

    Given the civil tone of Ramius and SurModics’ statements, and that SurModics did not outright reject Ramius’ nominees (which often happens in these cases), I think this is less a proxy battle than a negotiation between SurModics and its largest investor.

    So expect to see some sort of deal worked out before SurModics holds its annual meeting.

    Now, contrast SurModics with that of Zoran Corp. (NASDAQ:ZRAN), a maker of digital audio and video technology based in Sunnyvale, California. Earlier this month, Ramius said it would try to oust Zoran’s entire board, including the chairman.

    “We do not believe that the current Board has served the best interests of the Company’s stockholders, and we do not have confidence in the ability of the current Board to improve the Company’s operating performance and enhance stockholder value,” Ramius said.

    In response, Zoran urged shareholders to withhold judgment until it can file an official, unfriendly response. But Zoran essentially called Ramius greedy.

    “Zoran noted that Ramius is attempting to take control of Zoran’s Board and the Company without paying a control premium to other Zoran stockholders,” the company said in a press release. “Zoran also noted that Ramius is attempting to obtain board representation far in excess of its ownership interest in Zoran (approximately 8 percent of the Company’s outstanding shares).

    “Zoran expects to file consent revocation materials with the SEC including its response to several inaccuracies and misrepresentations that are contained in Ramius’s consent solicitation materials about the markets in which Zoran competes and Zoran’s current position and future outlook, among others,” the release said.

    Now THAT’S a proxy fight!

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Dec 14 7:32 PM | Link | Comment!
  • The plot thickens: Surmodics names CEO, puts for-sale sign on pharma unit
    I guess SurModics Inc. (NASDAQ:SRDX) just responded.

    Just a day after the company based in Eden Prairie, Minnesota, said it would formally respond to Ramius LLC’s efforts to name three people to its board of directors, SurModics announced late Tuesday it had named a new CEO and would explore a sale of its pharmaceuticals business.

    SurModics said it appointed Gary R. Maharaj as president and CEO six months after pushing out Bruce Barclay in June. Maharaj was previously CEO of Arizant Inc., which 3M Cos. (NYSE:MMM) recently acquired for $810 million.

    SurModics also said it hired Minneapolis investment bank Piper Jaffray & Co. to explore “strategic alternatives,” including a sale, for its pharmaceutical unit. Such a sale would be a tacit admission that its decision to open a $41 million pharmaceutical plant in Alabama just this year was a (very expensive) mistake.

    “Our Pharmaceuticals business has compelling long-term growth and profitability prospects and operates a world-class facility for the manufacture of both clinical and commercial pharmaceutical products,” Chairman Robert C. Buhrmaster said in a statement.

    “However, our Board determined that the best course of action is to explore alternatives for our Pharmaceuticals business so that we can dedicate more resources and efforts to pursuing growth opportunities and investments in our Medical Device and In Vitro Diagnostics businesses,” he said.

    The real question is how Ramius, the alternative investment arm of Cowen & Co., will react. The firm, which became SurModics’ largest investor by recently purchasing a 12 percent stake in the company, asked shareholders last week to approve its three nominees to SurModics’ board of directors.

    While critical of SurModics’ performance, Ramius said it wanted to help, not replace, the board.

    There really are only two possibilities here. One: Ramius already knew about the new CEO and possible pharma sale and approved it. Or two: SurModics wanted to preempt Ramius by taking action to appease shareholders.

    I initially leaned toward to Option One. But now, I’m not sure. Wouldn’t Ramius want a say in such major decisions? Otherwise, why nominate three people to the board?

    Ramius partner managing director Jeffrey Smith did not immediately respond to an e-mail seeking comment.

    The plot thickens.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Dec 14 7:29 PM | Link | Comment!
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