The latest clash between Carl Icahn and Forest Laboratories is taking a predictably heated, although amusing turn. Their latest exchange of letters, which are on display in US Securities and Exchange Commission filings, portray an increasingly frustrated billionaire raider trying to bully a crafty, if somewhat sleepy 84-year-old ceo and his team of hunkered-down handlers, who are doing their best to ensure that Icahn stews as much as possible.
Icahn, you may recall, owns about 9 percent of Forest Laboratories, which is arguably best known for marketing the Celexa and Lexapro antidepressants, and recently nominated four people to the board. And this is his second run at the drugmaker, after an aborted attempt a year ago, although Icahn renewed his quest after deciding Solomon was angling to have his son replace him as ceo while stacking the board with "loyal buddies."
In a letter sent last week to the Forest board, for instance, Icahn wrote that "Howard Solomon and this board, who collectively own less than 2 percent of this great company, must be made to realize that Forest Labs is not a dynasty to be despotically handed from down from father to son." He was referring to David Solomon, who is senior vp for corporate devleopment and strategic planning.
In his latest missive, Icahn, 76, derides the younger Solomon by writing his "only other experience involves promoting movies." And Icahn is now threatening to investigate $500 million in stock sales made by Howard Solomon at prices that were "substantially higher" than the price for which Forest stock trades today. "Those sales now look to me like a savvy bet against the prospects of a company that was not prepared to meet the calamitous events that would befall it several years in the future when Lexapro went off patent," he writes in a July 2 letter to Solomon.
"However, unfortunate loyal shareholders that were not privy to your knowledge and that still hold stock today have suffered very significant losses. You, on the other hand, who have sold over $500 million worth of Forest stock, are in an excellent position. Be assured, we intend to thoroughly investigate by all available means whether the knowledge you had at the time you sold your stock was fully disclosed to other less fortunate shareholders and to determine how you were so prescient in selling your Forest stock at prices well above the current market," Icahn warns.
"....You tell the shareholders all is well and hope they will continue to drink the Kool-Aid. But how can we believe you when you said all was well 5 years ago when you sold over $200 million of Forest stock. I believe the only way all will be well in this company is if management is held accountable. As things currently stand, your 'buddies' can award you 'boat loads' of options and you can 'swing for the fences,'”, Icahn continues.
"You can even possibly risk dissipating the nearly $3 billion of the company’s cash in an all-or-nothing effort if things get worse. If successful, you win and if unsuccessful, shareholders lose. In fact, we believe that shareholders may well be facing a second act of what occurred several years ago. In addition, your 'buddy' board can make your son your successor.
"The three board members added last year would find it difficult or impossible to stop such a scenario from being activated. The only event that could put a crimp in such a plan is my candidates getting elected to the board. Howard, I hope I am being overly cynical and I am incorrect about your motivation. I hope you will avoid a contentious and costly proxy fight and give your second largest shareholder board seats," Icahn concludes (here is the letter).
For its part, the Forest team has accused of Icahn of using a "tired playbook" that he wields to cause "maximum distortion, distraction distraction and litigation rather than engaging constructively with the company." They also charge he has ignored "substantial progress" with various product launches and submissions for drug approvals filed with the FDA, as well as a succession plan that is under way (see this).
This morning, the Forest team issued a brief reply to Icahn that attempts to cast him in a childish light. “We are not surprised by Mr. Icahn's theatrical display of self-serving rhetoric, but his public rants do not serve any useful purpose. Forest has always been willing to listen to its shareholders who offer substantive and helpful suggestions. We believe that the company's shareholders support our prospects to build value. Forest continues to advance its pipeline and is well positioned for the future. As we did last year when Forest shareholders decisively rejected his slate, we will respond appropriately to Mr. Icahn in due course” (read here). A year ago, when Icahn launched his first run at Forest, its stock was trading at around $40, but began sliding after he gave up his bid. The stock continued to dive, hitting $28.37 last winter, before climbing back up in recent months. In recent days, Forest stock has traded at around $36 a share.