Dissident ICN Shareholders Want 3 Board Seats

Even as ICN Pharmaceuticals Inc. works to settle federal civil and criminal claims against it, the Costa Mesa drug maker is being besieged again by dissident shareholders upset with Chairman Milan Panic and the slow pace of a plan to split the company into three independent units.

A new group called the ICN Committee to Maximize Shareholder Value said Tuesday that it had submitted a slate of three directors for the 14-member board. Shareholders are scheduled to meet in May, but a date has yet to be set.

The dissident group is led by Special Situations Partners Inc., a Cayman Islands-based investor with a 4% stake in ICN.

“We have to put pressure on Milan Panic by putting some independent directors on the board,� said Eric Knight, Special Situations managing director. “We believe shares are trading at a fraction of what they’re worth.�

ICN stock has fallen significantly since it hit its 52-week high of $41.75 on Oct. 20. Company shares lost 97 cents Tuesday to close at $23.65 on the New York Stock Exchange.

The nominees to the board are Gen. Ronald R. Fogleman, former U.S. Air Force chief of staff; Edward A. Burkhardt, former chairman and chief executive of Wisconsin Central Transportation Co.; and Steven J. Lee, chairman and chief executive of Polymedica Corp.

Specifically, Knight faulted ICN for failing to distribute to shareholders stock in two proposed units, Ribapharm Inc. and ICN International.

The committee’s action comes less than a month after dissident shareholder David Batchelder said he plans to reclaim his seat on the ICN board. That option is open to him as part of an agreement between Batchelder’s firm, Relational Investors LLC, and ICN.

Batchelder resigned from the board in late October after ICN announced its restructuring plan, but under the agreement, Relational Investors can appoint a director at ICN’s annual meeting if it believes the drug maker has not made sufficient progress in carrying out the restructuring.

The company accused the dissident committee of taking “another step to disrupt the ability of ICN to complete its restructuring, manage the company effectively and achieve a fair valuation for ICN stock.�

ICN said in a prepared statement that it remains committed to restructuring, but will not “move precipitously for the benefit of short-term speculators.�

Analyst Says Move ‘Adds to the Confusion’

Market conditions permitting, ICN hopes to take both Ribapharm and ICN International public this year. It would then distribute the remaining Ribapharm stock to shareholders, subject to a favorable tax ruling from the Internal Revenue Service.

But given the market’s turbulence, Special Situations and others question whether Panic has the ability or desire to undertake the restructuring.

Ribapharm, considered the crown jewel of the company, would own the rights to ICN’s top-selling product, the hepatitis drug ribavirin, while ICN International would handle business mainly in Eastern Europe and Russia. A third company, ICN Americas, would assume control of some ICN operations in the United States and Canada, Mexico, Puerto Rico and Latin America.

The move to nominate a slate of dissident directors “adds to the confusion surrounding ICN,� Mehta Partners analyst Tom DesChamps said.

On Monday, ICN said a federal grand jury had decided against indicting Panic and other ICN executives over claims they misled investors, but is still considering an indictment against the company itself. ICN said it is discussing a plea bargain to settle that and other legal issues.

Special Situations has clashed previously with Panic. In August, the European investment group, controlled by wealthy Swiss investor Tito Tettamanti, threatened to wage a fight for board seats during a dispute over ICN’s planned restructuring.