Depomed surges after activist letter to the board; Yahoo! richens on deal chatter

By Rebecca Melvin

New York, April 8 – Depomed Inc.’s convertibles surged in active trade on Friday after the Newark, Calif.-based specialty pharmaceutical company and Starboard Value LP disclosed that the investor holds a 9.8% ownership stake in the company and is pushing for better execution and capital allocation, removal of the board and potentially a sale of the company.

Depomed’s 2.5% convertibles jumped about 9 points on an outright basis to 109.125 and expanded on a dollar-neutral, or swap, basis by about 2.5 points, a New York-based sellsider said.

Depomed shares were up $1.87, or 12.5%, to $16.87.

Yahoo! Inc.’s 0% convertibles due 2018 also traded actively and richened about 0.25 point on swap on the day amid headlines that a potential deal may be solidifying for the web assets of the Sunnyvale, Calif.-based internet search, content and communications company, a New York-based trader said.

“There was more news about there being some form of a deal. Whether the headlines are true or not, they strengthen the idea that someone is going to buy Yahoo!,” the trader said.

There were many news reports on the subject following Bloomberg’s news article late Thursday, which said that Verizon Communications Inc. plans to bid for Yahoo! next week. It makes sense for Verizon, which also owns AOL, and the fact that it is willing to also buy Yahoo Japan Corp. to help sweeten the deal, according to the Bloomberg report.

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