Exclusive: Icahn offered to settle with Forest before battle

Tue Jul 10, 2012 12:27am EDT
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By Paritosh Bansal

NEW YORK (Reuters) - Activist investor Carl Icahn said he had initially tried to avoid a proxy fight against Forest Laboratories Inc and had offered to take at least two seats on the U.S. drugmaker's board, but he was rebuffed, leading to a battle that is becoming increasingly bitter and personal.

Icahn, Forest's second-largest shareholder with a stake of about 10 percent, re-launched a proxy battle against the maker of the Lexapro antidepressant in recent months and has now nominated four directors for Forest's board, after losing a similar battle for board seats last year.

The growing hostility, with Icahn and Forest's CEO even dragging in the records of their respective sons, shows that both sides have dug into their positions, which could make for a drawn-out battle. It could also worry Forest investors as they weigh the costs of a distracted management in a proxy fight.

Icahn said in an interview late on Monday that prior to launching the latest proxy fight, he told CEO Howard Solomon, 84, that Forest's expenses were too high and that the company did not have a good succession plan. He told Solomon he would nominate one independent director and one person from Icahn's firm to the board.

When Solomon told him that he did not want to replace any of the current directors, Icahn said he offered for Forest to keep its existing board while adding two of his nominees.

"I said, 'This company has major problems. I certainly, as the second-largest shareholder, would like to avoid a proxy fight. I don't think it has been managed well. I am very concerned about the succession planning. I am very concerned about the fact that you are going to be down 80 percent in earnings," Icahn said he told Solomon, referring to the company lowering its earnings forecast after it lost patent protection for its blockbuster Lexapro antidepressant.

Icahn told Solomon he was not there to take control of Forest and noted his track record in investing in biotech companies, but to no avail. "And he called me back. He just said, 'The board doesn't want you on.' And that was the end of it."

Icahn, whose healthcare investments have generated more than $2 billion in profits over the past six years, has said the share prices of Amylin Pharmaceuticals Inc, Biogen Idec, Genzyme Corp and ImClone Systems Inc increased by about 175 percent, 180 percent, 48 percent and 132 percent, respectively, from the time his representatives joined - or announced they were joining - those boards.   Continued...

Investor Carl Icahn speaks at the Wall Street Journal Deals & Deal Makers conference, held at the New York Stock Exchange, June 27, 2007. REUTERS/Chip East