PDL BioPharma Shareholder, SevenSaoi Capital, Comments on the Nomination of Shlomo Yanai to the PDL Board of Directors and Delivers Letter to the Board Outlining Significant Concerns
Following SevenSaoi's Nomination of Mr. Yanai to the PDL Board, SevenSaoi is Encouraged that the Company Has Added Mr. Yanai to its Slate of Director Nominees at the 2018 Annual Meeting
SevenSaoi Believes the PDL Board Must Focus on Improving Capital Allocation, Correcting Misalignment with Shareholders and Closing PDL's Valuation Gap
CHICAGO, April 9, 2018 /PRNewswire/ -- SevenSaoi Capital, LLC (together with its affiliates, "SevenSaoi," pronounced "7C"), a long-only public equity investment firm that owns 2,590,198 shares of common stock of PDL BioPharma, Inc. (NasdaqGS: PDLI) ("PDL" or the "Company"), is pleased that, following SevenSaoi's nomination of Shlomo Yanai to the PDL Board, the Company has added Mr. Yanai to its slate of director nominees for PDL's 2018 Annual Meeting. SevenSaoi introduced and nominated Mr. Yanai to the PDL Board as part of a slate of highly-qualified director candidates in March 2018. Since becoming investors in PDL in May 2017, SevenSaoi's principals have met on several occasions and had numerous conversations with the Company's management team and its Lead Director to convey SevenSaoi's serious concerns regarding how the Company is managed. In its letter to the Board, which can be accessed below, SevenSaoi outlines these concerns.
PDF: https://mma.prnewswire.com/media/664524/SevenSaoi_Capital_Board_Letter.pdf
"We know Mr. Yanai well and saw him have a significant impact at another small-cap pharmaceutical company in which we were also an investor, Sagent Pharmaceuticals. Mr. Yanai's experience at Sagent Pharmaceuticals is particularly relevant for PDL's circumstances – like PDL, Sagent was deeply undervalued relative to peers and had a management team focused on making acquisitions despite this disconnect," said Michael Cole, CEO of SevenSaoi. "At Sagent, Mr. Yanai ensured the company did not pursue value destructive acquisitions and instead explored strategic alternatives that ultimately resulted in a successful sale of Sagent to Nichi-Iko Pharmaceutical Co., Ltd."
On the basis of total shareholder return ("TSR"), PDL's stock has severely underperformed its peer groups. PDL has underperformed the Company's own self-selected peers by 36.4%, 187.5% and 276.0% over the past 3, 5 and 10 years, respectively. Measured against leading proxy advisory firm Institutional Shareholder Services' (ISS) selected peers, the Company has underperformed by 95.1%, 108.6% and 168.6% over the same respective timeframes. Beyond this massive underperformance, the market presently values PDL at a 74% discount to the current fair value of its portfolio of assets. That is, the fair value of its portfolio assets, per PDL, is $696 million, while PDL's enterprise value is only $179 million, as of April 6, 2018.
This massive valuation discount likely indicates investors' lack of confidence in the current strategy of the existing Board and management, both in terms of their inability to (1) accretively invest PDL's substantial cash holdings of approximately $400 million and (2) generate value from current investments. In SevenSaoi's view, the combination of PDL's undervaluation and its overcapitalization relative to peers (cash comprises 87% of the Company's total market cap compared to a peer average of 16%) merits a greater allocation of capital towards share repurchases and increased acquisition discipline.
Given the Company's decade-long track record of destruction of shareholder value, SevenSaoi is deeply concerned about PDL's current campaign to acquire new pharmaceuticals companies and products. SevenSaoi's letter to the Board details three main areas of concern:
- Poor capital allocation and acquisition practices
- Misalignment of management compensation with shareholders' interests
- Inconsistent communication of the Company's value to the investment community and execution of its changing strategies
Cole continued, "We believe that PDL's current strategic direction, which has been driven in part by its ill-conceived executive compensation structure, is directly at odds with the interests of the Company's shareholders. We are pleased that the Company is adding Mr. Yanai, one of SevenSaoi's nominees, to its Board in an encouraging step in the right direction toward realigning the Board with shareholder interests. However, we will continue to closely monitor the situation at PDL to make sure the Company is focused on pursuing strategies that enhance shareholder value."
SevenSaoi does not at this time plan to contest the Company's slate of director nominees, and intends to withdraw its slate of nominees, at the 2018 Annual Meeting. However, given the critical choices the Company currently faces, SevenSaoi urges the Board to appoint Mr. Yanai immediately to his directorship at PDL, rather than wait for the Annual Meeting in June. SevenSaoi will continue to be active investors and close observers of the Company's progress in the coming year.
About SevenSaoi Capital, LLC
SevenSaoi Capital, LLC is a Chicago-based, long-only investment firm focused on making private equity-style, fundamentally-driven, long-term oriented investments in publicly-traded small cap companies, primarily in the healthcare, technology, media, and telecommunications industries. This strategy builds on its principals' successful 20+ year track record of private and public equity investment experience in these sectors. SevenSaoi invests in deeply undervalued companies and constructively engages with management teams and boards of directors to identify and execute on opportunities to unlock value for the benefit of all shareholders.
Media and Investor Contact:
SevenSaoi Capital LLC
J.T. O'Connor (773) 938 6307
SOURCE SevenSaoi Capital, LLC
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