Carl Icahn Responds to Forest Labs Board
July 17 2012 - 12:47PM
Carl Icahn today issued the following statement to the Board of
Directors of Forest Laboratories, Inc., in response to their letter
to shareholders issued on July 16, 2012.
Your recent letter has taken things a step further from
obfuscation to blatant mischaracterization. Therefore, I would like
to clarify the following:
- Pierre Legault – Contrary to your letter, Mr.
Legault was not the cause of the conditions that led to the
management shakeup at Jean Coutu. He was part of the solution. As
clearly set forth in the Reuters' article that you cite in support
of your unfounded assertions, Mr. Legault was made EVP at Jean
Coutu in November as a result of poor results for the quarter
ending that month – he arrived after the problem!
In addition, as clearly set forth in the Wall Street Journal
article you cite, Mr. Legault was not dismissed
from Rite-Aid. Your liberal use of misleading citations
makes me wonder whether you've read the articles you refer to at
all or if you've read them and hope no one else does.
YOU SHOULD IMMEDIATELY RETRACT THESE COMMENTS AND ISSUE A
PUBLIC APOLOGY TO MR. LEGAULT.
- Daniel Ninivaggi – Daniel
Ninivaggi is the president of a multi-billion dollar Nasdaq listed
company and more importantly, he is an officer of your second
largest shareholder. In that capacity and as a board member
of various companies, including Motorola Mobility and CIT, Mr.
Ninivaggi has enacted significant cost reductions focused on
operating improvements and G&A spending, areas that we believe
need significant improvement at Forest. Moreover, Mr.
Ninivaggi has monitored and overseen capital spending to safeguard
against misuse and inefficient allocation – particularly
significant at Forest given its $3.2 billion of cash and the
exigencies created by the Lexapro/Namenda revenue
gap. Accordingly, he is highly qualified to be a
Forest Labs board member and his interests are well-aligned with
all other shareholders. Nonetheless, you say that Mr.
Ninivaggi has no relevant experience. Interestingly, when you
tout the credentials of your existing board, you mention being an
"attorney" as the credentials of one of the current board
members. I assume you are referring to Dan Goldwasser, as I
see no other discernible qualifications that he
possesses. Note that, among his many qualifications, Mr.
Ninivaggi was a partner at a major law firm for several
years. I suppose being an attorney only makes one
qualified to serve on the Forest board if that attorney is also an
incumbent director – how convenient.
- Andrew Fromkin – Andrew Fromkin would be, in
my opinion, a perfect fit for the Forest Labs board. He holds
relevant qualifications far beyond his recent experience at
Clinical Data that would benefit any pharmaceutical
company. Most recently, Mr. Fromkin led Clinical Data, Inc., a
public company, through a successful transformation into a
pharmaceutical company where he demonstrated his experience in drug
licensing and M&A transactions, efficient drug development and
gained first-pass FDA drug approval of Viibryd, a drug that the
company is relying on significantly to make up the Lexapro/Namenda
revenue gap. Further, he not only brings a strong
understanding of pharmaceutical business operations but from his
extensive business experience in the healthcare
industry, he has developed a deep understanding of other
healthcare sectors and relevant strategies that are vital to
achieving commercial drug adoption. I just ask that
you honestly compare his qualifications to those of some of the
incumbent directors. To say that he is not qualified is absurd
in my opinion.
- Eric Ende – Your criticisms of Mr. Ende are
baffling to me. I expend personal resources to compensate and
incentivize a highly qualified individual to serve on the Forest
board and you claim this makes him conflicted. But in fact,
like Mr. Ninivaggi, Mr. Ende's interests are tied to the success of
Forest for all of its stockholders. He only makes money if
Forest's stock price goes up during the next 2 ½ years which is
good for all stockholders.
Is Howard Solomon conflicted when you grossly over-compensate
him in options and restricted stock with accelerated vesting while
he oversees a massive destruction in shareholder value over the
past 10 years? Is it a conflict when Howard Solomon was
selling stock while the company was repurchasing stock? Is it
a conflict when Howard Solomon was part of a board meeting where
his potential exclusion by the US government was being
considered? I don't believe this Board has the slightest grasp
over what constitutes a conflict. In addition, as I am sure
you know, just because Mr. Ende was not elected to the Board last
year does not mean that stockholders feel the same this
year. Under your watch, Forest has underperformed your
self-chosen peer companies by 21% since last year's
meeting. Given that underperformance, it wouldn't surprise me
if many shareholders vote differently this time around. YOU
SHOULD NOT USE LAST YEAR'S VOTE AS AN EXCUSE FOR
COMPLACENCY.
Perhaps in your zeal to preserve the status quo at
Forest you have failed to recognize that a lack of alignment with
management is not a conflict of interest.
You express concern regarding the independence and
qualifications of my nominees. If only you employed that
exacting (albeit incorrect) scrutiny over the company's board
members, perhaps Kenneth Goodman, Howard Solomon's "right
hand man" at Forest for nearly 20 years, wouldn't be the presiding
"independent" director, or perhaps Dan Goldwasser, Howard's old
"buddy" on the board for the past 35 years, wouldn't be the
Chairman of the Compensation Committee (even after many of
the compensation practices of the company have been roundly
criticized). And recall shortly after I commenced my proxy
contest last year, you replaced two board members, George S. Cohan,
87 years old, and William J. Candee, 84 years
old. Prior to that, Mr. Cohen, president of George
Cohan Company, Inc., a consultancy, was on the Board for 35 years
and Mr. Candee, president of a local trucking company and "of
counsel" at a mid-size law firm, was on the board for over 50
years. It seems to me that you have two sets of
standards in assessing director qualifications – an overly lenient
standard for incumbent directors and an excessively unforgiving
standard for nominees chosen by shareholders.
I also find it almost comical that you superficially assert that
you have "carefully reviewed and considered Mr. Icahn's nominees
and has determined that his candidates are far less qualified than
our slate of experienced directors." All this without the
courtesy of a single interview. If this is the extent
of deliberation involved in all significant board decisions, then
shareholder value may be imperiled to an even greater degree than I
imagined.
It is my strong belief that Forest will benefit greatly from a
board with a stronger shareholder orientation. You say that having
directors that are aligned with me as a large shareholder creates a
conflict of interest or will be negative for the company and other
holders. But it seems to me that the stock performance of
other companies where we have succeeded in electing directors
proves you wrong. I believe that my nominees would be
a strong force in replicating the stellar results that persons I
have nominated to boards have helped to produce in other bio-pharma
companies, such as Amylin, Biogen, Genzyme and Imclone. What
you disparage as a conflict is in fact the true recipe for
success — at Forest and at any business enterprise, the
alignment of the board of directors of a company with the interest
of its owners — the stockholders — rather than the
interest of non-owner management.
SECURITY HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT AND
OTHER DOCUMENTS RELATED TO THE SOLICITATION OF PROXIES BY CARL
C. ICAHN AND HIS AFFILIATES FROM THE STOCKHOLDERS OF FOREST
LABORATORIES, INC. FOR USE AT ITS 2012 ANNUAL MEETING WHEN THEY
BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION,
INCLUDING INFORMATION RELATING TO THE PARTICIPANTS IN SUCH PROXY
SOLICITATION. WHEN COMPLETED, A DEFINITIVE PROXY STATEMENT AND A
FORM OF PROXY WILL BE MAILED TO STOCKHOLDERS OF FOREST
LABORATORIES, INC. AND WILL ALSO BE AVAILABLE AT NO CHARGE AT THE
SECURITIES AND EXCHANGE COMMISSION'S WEBSITE AT
HTTP://WWW.SEC.GOV. INFORMATION RELATING TO THE PARTICIPANTS
IN SUCH PROXY SOLICITATION IS CONTAINED IN THE AMENDED PRELIMINARY
PROXY STATEMENT FILED BY MR. ICAHN AND HIS AFFILIATES ON JULY 11,
2012 (THE "PRELIMINARY PROXY"). EXCEPT AS OTHERWISE DISCLOSED
HEREIN OR IN THE PRELIMINARY PROXY, THE PARTICIPANTS HAVE NO
INTEREST IN FOREST LABORATORIES, INC. OTHER THAN THROUGH THE
BENEFICIAL OWNERSHIP OF SHARES OF COMMON STOCK, PAR VALUE $0.10 PER
SHARE, OF FOREST LABORATORIES, INC., AS DISCLOSED IN THE
PRELIMINARY PROXY. THE PRELIMINARY PROXY IS AVAILABLE AT NO
CHARGE AT THE SECURITIES AND EXCHANGE COMMISSION'S WEBSITE AT
HTTP://WWW.SEC.GOV. CONSENT OF THE AUTHOR OR PUBLICATION WAS
NEITHER SOUGHT NOR OBTAINED TO USE THE ARTICLES MENTIONED HEREIN AS
PROXY SOLICITING MATERIAL.
CONTACT: Susan Gordon
(212) 702-4309
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