April 1, 2009

Novel No-Action Response: Ability to “Round Out” Minority Slates with Other Insurgents

Recently, Carl Icahn and Eastbourne Capital Management each sent a similar no-action request to Corp Fin that is quite interesting. I can’t recall seeing anything quite like it before. Summarizing the gist of the Staff’s no-action response given on Monday, Icahn not only will be able to solicit votes for his own minority slate at Amylin Pharmaceuticals – but he can seek authority to vote for another minority slate offered by Eastbourne. Eastbourne also received it’s own response permitting them to do the same.

As I understand it, here is how the “rounding out process works. Either shareholder can seek general authority to vote for the other shareholder’s nominees, as well as the company’s nominees. Technically, the shareholder does not include the names of the other shareholder’s or the company’s nominees on its ballot. Instead, they just seek to vote for the other nominees generally and only list the names of the persons for whom the shareholder will not vote.

Under the Staff’s responses, each shareholder will be able to “round out” a short slate as long as the two shareholders are not forming a group and not agreeing to act together. The Staff’s relief includes other controls limiting the activities of the shareholders, including that each will not recommend the election of the other’s nominees.

As noted in Icahn’s incoming request (here is Eastbourne’s incoming request), Rule 14a-4(d) doesn’t deal with a situation where there are two separate shareholder-proposed minority slates. On a policy basis, Icahn argued that there is no evidence from past SEC actions that shareholders offering a short-slate must “round out” their nominees from management’s candidates.

I imagine this unique scenario might become a little more common going forward as shareholders turn increasingly active…