(Adds details of agreement with Starboard)
By Michael Flaherty
Oct 17 (Reuters) - Depomed Inc on Monday reached a deal with activist investor Starboard Value LP to avoid a shareholder vote due next month to oust the drugmaker's entire board.
As part of the agreement, Starboard agreed to drop the Nov. 15 vote in exchange for adding three directors chosen by the hedge fund to Depomed's board, the company said in a press release.
Depomed also said it has agreed to move the window for shareholders to nominate directors to the board to March 15, 2017. Starboard has agreed to certain restrictions until that date, the company said, at which point it will be allowed to nominate more directors if it chooses.
The five-month truce allows Depomed to put the threat of a proxy fight on hold. It also allows the company to explore its possible sale without that distraction hanging over the process.
A date for Depomed's 2017 annual meeting has not been set, a company spokesman said.
Reuters reported last month that the company was working with investment bank Morgan Stanley to seek buyers. The Newark, California-based company worked with the bank when it fended off a $3 billion unsolicited stock-for-stock offer last year from Horizon Pharma Plc (HZNP.O).
Reports of Depomed as a possible takeover target resurfaced in April when Starboard said it owned nearly 10 percent of the company's stock and began pushing for a sale.
The deal announced on Monday is the first time the two-sides have reached a public agreement since Starboard's campaign began.
The three Starboard-backed directors who will join Depomed's board as independent directors are James Fogarty, Robert Savage and James Tyree, the company said. The agreement takes Depomed's board to nine members from six.
(Additional reporting by Akankshita Mukhopadhyay in Bengaluru; Editing by Maju Samuel and Andrew Hay)