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Stada shareholder AOC pushes through board reshuffle

The logo of the pharmaceutical company Stada Arzneimittel AG is pictured at its headquarters in Bad Vilbel near Frankfurt March 14, 2012. REUTERS/Alex Domanski

By Georgina Prodhan and Alexander Hübner

FRANKFURT (Reuters) - Stada (STAGn.DE) shareholder Active Ownership Capital (AOC) succeeded in convincing stock owners of the German drugmaker to vote off its supervisory board chairman in a voting marathon, but the activist investor fell short of its goal of replacing the entire board.

In a five-hour voting showdown on Friday, shareholders at the company's annual general meeting voted Chairman Martin Abend off the supervisory board with a slim majority of roughly 56 percent.

"Stada shareholders today have clearly spoken out in favour of a change at the top of the supervisory board and the organisation's corporate governance," AOC said in a statement after the vote.

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But AOC, which had wanted to replace six of Stada's nine directors, only succeeded in placing one of its candidates, Eric Cornut, on the board.

Cornut, a former Novartis (NOVN.S) manager, was AOC's preferred choice to replace Abend, but his nomination is pending the supervisory board's approval, which is skewed in favour of Stada-backed candidates.

Four posts had been vacated by board members who resigned but AOC wanted to replace all six shareholder representatives on the board. The other three board member places are reserved for labour representatives.

But in a voting procedure that ran until close to midnight local time, shareholders eventually settled on two Stada-backed candidates in a second-round run-off.

"LEGAL MEASURES"

AOC, which has said the 120-year-old company needed more international expertise in a modern world, only supported two of Stada's four proposed candidates, leaving the investor with only three potential board votes in its favour.

The activist investor in a statement said it was now looking into legal measures to challenge the second-round run-off elections.

Earlier on Friday, one of AOC's founding partners said the investor had no desire to break up the company but only campaigned for a modern overhaul.

Stada's former Chief Executive Hartmut Retzlaff quit on health grounds last week after 23 years during which he listed Stada on the stock exchange, opened its shareholder base to non-pharmacists and increased its revenue more than 20-fold.

But critics said he ran the company like a personal fiefdom and the media referred to "System Retzlaff", which included a tight circle of advisers and a plum job for the CEO's son.

"I have a problem with those people who chose their own interests over the interests of Stada and its shareholders," AOC founding partner Florian Schuhbauer told Friday's shareholder meeting, referring to Retzlaff and long-time Chairman Martin Abend.

"Those two men over many years simply forsook their responsibilities," he said.

Schuhbauer rejected the description of AOC as an "activist" investor, saying the firm, which holds 7 percent of Stada in shares and options, considered itself an "anchor investor" - a style of activism that is gaining popularity in Germany.

In a report published on Friday, JPMorgan (JPM.N) noted the growing number of shareholder campaigns in Europe - 99 in the 12 months to end-June compared with 61 in the year-earlier period - as well as their different style from U.S. activist campaigns.

"In the more typical European campaign cadence, activists have historically favoured engaging privately with boards and gaining representation first rather than disclosing detailed plans for improving and/or transforming their targets upon the initial campaign announcement," it said.

"HUGE POTENTIAL"

Stada's new CEO Matthias Wiedenfels promised a more modern, dynamic approach to running the company, saying it had to improve its transparency, flexibility, hierarchies and communication, although it had no need to change its strategy.

"We have a huge potential that we have not yet taken advantage of," he told the shareholder meeting.

Cornut had told the meeting he would be prepared to serve as chairman if elected, while Abend delegated his job of chairing the AGM to a lawyer, saying he did not want to be accused of any bias in the way he ran the meeting.

Another activist investor, Guy Wyser-Pratte, who has a stake of just under 3 percent, said last month that buyout firm CVC Capital Partners was interested in buying the drugmaker and that would be a better plan than AOC's suggested board overhaul.

($1 = 0.8825 euros)

(Reporting by Alexander Huebner and Georgina Prodhan; Additional reporting and writing by Tina Bellon; Editing by James Dalgleish)