Agreement Between Genzyme and San Diego Activist Shareholder Suggests Truce

Xconomy San Diego — 

In what may be a pre-emptive move to turn down the heat, beleaguered Genzyme (NASDAQ: GENZ) says today it has entered into a “mutual cooperation agreement” with Relational Investors, the $6 billion activist investment fund based in San Diego.

The private investment firm began to acquire Genzyme shares in 2008, and Relational co-founder Ralph Whitworth began to publicly call for changes late last year at the Cambridge, MA-based biotech. Whitworth’s expertise in corporate governance and his reputation as an activist investor triggered a flurry of media speculation about the prospects for a shakeup at Genzyme. The San Diego fund now owns about 4 percent of the company’s stock.

Whitworth praised Genzyme’s appointment of former Schering-Plough executive Robert J. Bertolini to its board in early December, but called for “significant further improvements” in the composition of Genzyme’s board. At the time, Whitworth would not rule out waging a proxy battle to bring about such changes, according to a Dow Jones report. (Whitworth’s office did not respond in December to my request for an interview.)

Whitworth, who joined investor David Batchelder at Relational Investors in the early 1990s, prefers to work for change inside the boardroom. In his profile on the Relational Investors website, Whitworth describes the time he served as chairman of Waste Management in 1999 “as a major crisis management assignment in the midst of an accounting scandal.” Whitworth, who served on Waste Management’s board from 1998 to 2004, assumed responsibility for overall management at the company in 1999, including an extensive audit and a recruiting effort to replace the management team. In 2000, during Whitworth’s tenure as chairman at Apria Healthcare Group, Institutional Shareholder Services named the home health provider the “best governed company in North America.” At the same time, Whitworth’s not afraid to get into a public scrap—such as the 2007 battle that Relational Investors waged over the compensation package awarded to Home Depot CEO Robert Nardelli.

As part of the agreement announced today, Relational Investors has pledged to support Genzyme’s slate of board candidates and other proposals in 2010. If Relational is not satisfied with those changes and still wants a … Next Page »

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