Exclusive: Icahn offered to settle with Forest before battle

Tue Jul 10, 2012 3:52pm EDT
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By Paritosh Bansal

NEW YORK (Reuters) - Activist investor Carl Icahn said he initially tried to avoid a proxy fight with Forest Laboratories Inc and 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, in recent months re-launched a proxy battle against the company, maker of one-time blockbuster antidepressant Lexapro and other drugs. Icahn 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 chief executive even dragging in the records of their respective sons, shows that both sides have hardened 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 also told Solomon he would nominate one independent director and one person from Icahn's firm to the board.

When Solomon told Icahn that he did not want to replace any of the current directors, Icahn said he offered to let Forest 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 Lexapro earlier in 2012.

Forest said on Tuesday that Icahn wanted Eric Ende, a former Merrill Lynch biotechnology analyst who is now leading the proxy fight for the billionaire investor, and Daniel Ninivaggi, president of Icahn Enterprises, as his nominees.

"The two nominees on which he insisted are clearly not suitable for, nor up to the standards of, the Forest board," Forest said.   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