ICN Set to Face Second Proxy Showdown Over Directors
Apria Strikes Tentative Settlement of Shareholder Class Actions
HEALTHCARE by Vita Reed
Costa Mesa drug maker ICN Pharmaceuticals Inc. finds itself in a not-so-unusual position,scrapping with dissatisfied shareholders.
But this time, the fighting doesn’t involve Special Situations Partners Inc., the group controlled by Swiss financier Tito Tettamanti, an outspoken critic of ICN’s restructuring plans.
ICN now is squaring off with two big institutional investors over the company’s director-nomination process and the investors’ bid to nominate their own director candidates.
Late last month, ICN set up a nominating committee for candidates for the expiring terms of several ICN board members before its shareholder meeting set for May 29. The move came after Iridian Asset Management LLC of Westport, Conn., and Franklin Mutual Advisers LLC of Short Hills, N.J., said they planned to support three candidates of their own.
Iridian and Franklin Mutual Advisers’ parent company, Franklin Re-sources Inc., are among ICN’s top institutional shareholders. As of March 21, Iridian and Franklin together owned 9.5% of ICN’s 82.7 million outstanding shares.
Last week, Iridian and Franklin Mutual Advisers said that they would vote in support of Richard H. Koppes, a former counsel at the California Public Employees’ Retirement System now with Stanford University Law School; former PacifiCare Health Systems Inc. chief executive Robert W. O’Leary; and Randy H. Thurman, chief executive of Viasys Healthcare Inc.
ICN’s response: “disappointment that a proxy contest would be mounted at a crucial time in the restructuring of the company,” ICN said in a statement.
A year ago, Special Situations Partners and New York-based Providence Capital Inc. backed three dissident director candidates and prevailed in a bitter election fight with ICN.
In their letter, Iridian and Franklin called ICN’s nominating committee a knee-jerk response to their candidate slate.
“We are gratified that a company whose historical board selection process could, in our opinion, most charitably be described as ad hoc, has decided to appoint a nominating committee and to do so without a public announcement,” Iridian and Franklin said in a statement. “We find it ironic and significant that ICN’s decision to create a committee took place only following the company’s becoming aware of the formation of our group.”
Iridian and Franklin went on to say that they had “the highest regard and respect” for three dissident directors nominated and elected last May. Those directors are Ronald Fogleman, Edward Burkhardt and Steven Lee. Burkhardt and Fogleman are members of ICN’s nominating committee.
Iridian and Franklin also said ICN’s action “may well be an indication of the salutary effect on a company’s governance practices that even a minority of shareholder-nominated and supported directors can have. However, we and ICN’s other shareholders will perhaps be forgiven if we declare ourselves more than a little skeptical of ICN’s motivation and somewhat less than fully confident in whatever may result from the company’s sudden and convenient conversion to the gospel of good governance.”
Iridian and Franklin then said shareholders would be best served “by giving the shareholder-electorate the chance to choose for themselves between alternative slates of qualified candidates,one sponsored by shareholders, the other by management.”
ICN fired back at the Iridian and Franklin comments in its own news release on April 3. “It is disingenuous to claim that any choice is to be made between a shareholder slate and a management slate, when there are only two shareholders involved in this group and the company’s nominating committee is a creation of shareholders, not of management,” said Alan Charles, a company spokesman.
Running an alternative slate “would thwart the nominating process and would place our stockholders at risk at a time when the company’s performance is at its best and our restructuring is in process,” Charles said. “Their action is just an attempt to undermine a fair and democratic corporate governance procedure of the sort that this group claimed it wanted. I don’t think they can have it both ways.”
Last week, however, ICN dropped its plan to provide stock options for Ribapharm Inc., an ICN biotechnology spinoff that’s considered a crown jewel of its breakup plan, to ICN management and directors. Those options were among the things opposed by the Iridian and Franklin dissident shareholder group.
Ribapharm made its public debut on Friday.
Apria Reaches Settlement
Apria Healthcare Group Inc., Costa Mesa, said that it has reached a tentative settlement of class-action shareholder lawsuits filed in 1998 after the home healthcare provider’s shares plunged some 80%.
In its annual report filed April 1 with the Securities and Exchange Commission, Apria said it has paid $1 million to a settlement pool of $42 million. The balance of the settlement comes from Apria’s insurers. The company said in the filing that it doesn’t believe the settlement will have a material adverse effect on its results or operations.
According to the filing, Apria is settling both the consolidated federal and state class actions. Apria said it also has agreed to provide indemnities to some current and former Apria officers and directors.
Final settlement documents are due at Orange County Superior Court by Tuesday, according to Apria’s filing.
