Activist investor Carl Icahn, engaged in a proxy battle against the management of drug maker Forest Laboratories Inc. (FRX: Quote), said Monday that he plans to investigate the sale of over $500 million of stock by the company's chairman and CEO Howard Solomon over the past few years.
In a letter to Solomon, Icahn accused the CEO of having begun a pattern of selling Forest stock at "prices substantially higher than today's price".
Icahn said in his letter, "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. However, unfortunate loyal shareholders that were not privy to your knowledge and that still hold stock today have suffered very significant losses."
Icahn, who it the second largest shareholder in Forest Laboratories with a 9.92 percent stake, said he plans to thoroughly investigate whether the knowledge Solomon had at the time he sold his stock was fully disclosed to other "less fortunate" shareholders.
Further, Icahn alleged Solomon of being afraid to give him board representation and expressed the hope that the company's management will avoid a costly proxy fight by giving the activist investor board seats.
He questioned whether it whether it was appropriate to continue to keep stockholders in the dark regarding the succession plans of a company that has an 84-year old Chairman who has been the CEO for 35 years and has continually promoted his son, whose only other experience involves producing movies.
Icahn also said in his letter, "It seems to me that you would believe it to be a distraction if a member of the board would dare question the propriety of your receiving in excess of $60 million in compensation while you oversaw a 50% decline in the company's share price."
In response to Icahn's letter, Forest Laboratories said it was not surprised by Icahn's "theatrical display of self-serving rhetoric", adding that Icahn's public rants do not serve any useful purpose. The company added that it has always been willing to listen to its shareholders who offer substantive and helpful suggestions.
The company said in its letter, "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."
In early June, Forest Laboratories lowered its earnings outlook for fiscal 2013, citing "evolving and unanticipated conditions" in the Lexapro/escitalopram market after the drug maker lost patent protection for its anti-depressant drug Lexapro in March this year.
Forest Laboratories said last Tuesday that it has received notice from entities affiliated with Carl Icahn stating their intention to nominate four individuals to the company's ten-member board of directors for election at the 2012 annual meeting.
FRX closed Monday's trading at $35.79, up $0.80 or 2.29 percent on a volume of 2.84 million shares.
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by RTT Staff Writer
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