55.6 F
Laguna Hills
Monday, Oct 2, 2023

PROXY WARS: ICN’s Round Two Coming to a Head

PROXY WARS: ICN’s Round Two Coming to a Head


Costa Mesa’s ICN Pharmaceuticals Inc. is set to learn this week if it’s getting three new outside directors after a relatively quiet proxy campaign, the drug maker’s second in as many years.

ICN and Milan Panic, its combative founder and chief executive, have campaigned in the weeks leading up to Wednesday’s shareholder meeting. The company’s strategy included taking out ads in the Wall Street Journal touting its performance and products, as well as launching a pro-ICN Web site.

“The campaign has gone well,” said Alan Charles, ICN’s executive vice president of corporate relations. “We’ve been visiting major shareholders and the response has been really, I think, pretty favorable.”

If ICN loses the proxy vote, dissidents stand to control six of nine seats on the company’s board.

This year’s contest has seen its share of acrimony, though it has been more subdued than last year’s contentious fight. A year ago, ICN saw three outside directors elected after a bruising campaign in which the company took out ads attacking the candidates and a dissident shareholder.

“My sense is (ICN) is just recognizing that this is a hopeless cause for them,” said an institutional investor last week who asked not to be named. “(But) we have a week to wait with somebody who is a great survivor,nobody sees (Panic) going down without a fight.”

While the tenor of the debate has shifted, the issues haven’t. ICN, a midsize drug maker with a market value of $2.2 billion last week, has faced charges that it should have a higher value.

Critics also say Panic, a former Yugoslavian prime minister who started ICN in 1960 with $200, has dragged his feet in breaking ICN into three companies.

“The company’s long-term successful performance record has been challenged,” ICN’s Charles said. “We have to defend it. It’s been a very prosperous and successful company. It’s got $400 million in the bank that’s been used by the company for growth purposes, a business plan for growth and acquisitions, and our deep pipeline.”

Tim Rankin, an assistant portfolio manager at Franklin Mutual Advisers LLC of Short Hills, N.J., one of the shareholders leading this year’s proxy campaign, declined to predict an outcome in this week’s vote, citing federal regulations.

But he did say, “I am extremely optimistic. I believe we have the support of a large number of ICN shareholders.”

ICN lost last year’s fight to a shareholder group that included Providence Capital Inc. of New York and Special Situations Partners Inc., a fund controlled by Swiss financier Tito Tettamanti, a strident critic of ICN’s restructuring plans.

This time, “it appears that ICN is running a more professional campaign, rather than a drag-through-the mud campaign,” Rankin said.

Franklin, a unit of San Mateo-based Franklin Resources Inc., is allied with Westport, Conn.-based Iridian Asset Management LLC. The two own a combined 10% of ICN. Other big investors include Citigroup Inc., which owns 8.3% of the drug maker’s 83 million outstanding shares.

Franklin and Iridian’s effort, Rankin contends, “is about doing the right thing for the shareholders. The reception of investors has been extremely supportive,people understand why we’re doing what we’re doing.”

Rankin didn’t let ICN entirely off the hook in this year’s campaign: “They certainly continue to place plenty of misleading statements, plenty of misleading ads, and certainly are not being as professional as we would wish.”

ICN’s Charles responded by criticizing the dissidents’ campaign, saying they’re more interested in replacing management than boosting value. He called their allegations “high-pitched. I would say it’s intense, and in a lot of ways, unfair.”

“They’re claiming almost anything that would lead to a vote for the dissident slate,” he said.

So far ICN has set up a board for ICN International and overseen the public debut of its Ribapharm Inc. biotechnology subsidiary. But those moves haven’t satisfied critics who argue that neither of the offshoots are independent of Panic’s control.

Iridian-Franklin’s candidates are: Richard Koppes, a former counsel at the California Public Employees Retirement System now at Stanford University Law School; Robert O’Leary, former chief executive of Santa Ana-based PacifiCare Health Systems Inc., and Randy Thurman, chief executive of Viasys Healthcare Inc. of Conshohocken, Pa.

ICN’s slate is made up of former U.S. Sen. Birch Bayh, Abraham Cohen, a retired senior vice president at Merck & Co., and Rosemary Tomich, owner of the Hope Cattle Co.

ICN had proposed Koppes on its own slate but later backed off after he raised objections to being backed by management. Tomich, whose ICN board term is expiring, replaced Koppes on the company’s slate.

“ICN tried to co-opt Rich Koppes’ reputation, which he objected to,” Rankin said. “It’s unfortunate that the company either didn’t understand or thought they could twist his words in such a way that they could co-opt his reputation, regardless of his intentions.”

Charles said ICN was trying to compromise with dissidents by nominating Koppes,”a gesture of good faith,” he said.

“He’s a very high-integrity guy,” Charles said.

Panic hasn’t stayed above the fray.

Earlier this month, he touted ICN during a CNBC interview.

“You have another battle on your hands here,” interviewer Bill Griffeth said.

“No, I have an excellent last year, excellent fourth quarter, a billion-dollar drug,” Panic said. “And I think the people who are engaging in this kind of thing should look at their results.”

Panic characterized the proxy fight as ICN’s David vs. Goliath and seemed irritated after Griffeth contended that ICN’s stock price “has done virtually nothing” during a five-year period.

“That is first, inaccurate,” he said. “They can say whatever they want, (but) the stock market long term is an excellent measure of performance in the company. I started this with $200, one cent a share. It’s now 28.”

ICN said it’s started a search for a chief executive to succeed Panic. ICN picked three board members, including Ronald Fogleman, who was elected on last year’s dissident slate, to carry out the search. ICN also hired Korn/Ferry International to assist with the search.

The institutional investor derided ICN’s move as a “smokescreen” and as a way to convince shareholders who may be leaning against Panic that he’s actually stepping down.

Panic, in a sign of his legendary combativeness, told CNBC that he wasn’t going to step down just because dissident shareholders might see their board candidates prevail.

“However, I am 72 years old,” he told CNBC. “I have to consider stepping down.”

Then he fired a salvo at the dissidents: “I put in performance 41 years. (The proxy fight) is distracting management. It’s not helping us make money. And for sure they are responsible for the stock being down.”

Franklin’s Rankin said investors want “a transition of leadership away from Milan Panic and to a new and professional management team” and “the depressing effect of Milan Panic’s leadership removed.”

The dissidents also hope to take aim at Ribapharm’s board and management “to recompose those in such a way that investors would have full confidence in the independence of the board,” Rankin said.

Want more from the best local business newspaper in the country?

Sign-up for our FREE Daily eNews update to get the latest Orange County news delivered right to your inbox!


Featured Articles


Related Articles