Activist Investor Named to Board at Troubled ICN : Appointment: David Batchelder becomes a director of the Costa Mesa drug maker under fire from shareholders and the SEC.
ICN Pharmaceuticals Inc., developer of the hepatitis C drug ribavirin, said Monday that it has named activist shareholder David Batchelder to a three-year term on its board of directors. The move comes as federal regulators and the Costa Mesa drug maker’s largest shareholder seek the ouster of ICN’s controversial chairman and chief executive, Milan Panic.
Batchelder, 50, is a former lieutenant of T. Boone Pickens, a Texas oilman and corporate raider of the 1980s. Several years ago, Batchelder helped start Relational Investors LLC, an activist fund whose largest investor is the California Public Employees’ Retirement System.
Relational buys stakes in troubled companies and seeks to turn them around. Its current projects include running the struggling Waste Management Inc. and engineering the rebound of Apria Healthcare Group, a Costa Mesa home health care company, by replacing its management team and board of directors.
Earlier this month the Securities and Exchange Commission charged Panic and other ICN executives with misleading investors about an unsuccessful attempt to win approval for a drug. That controversy caused the company’s shares to fall.
“The addition of Mr. Batchelder will continue to ensure that ICN’s interests and the interests of the investment community are aligned,” Panic said in a statement Monday. An ICN spokesman declined to elaborate, saying only that Panic was traveling in Europe and unavailable for further comment.
Batchelder also couldn’t be reached for comment. Ralph Whitworth, Batchelder’s partner at Relational, declined to say whether his company will seek Panic’s resignation. “David is going to join the board and work constructively to assist with some of the issues facing the company,” Whitworth said Monday.
ICN appointed Batchelder after his investment company bought 1.6 million ICN shares. Relational signed a standstill agreement that forbids it from raising that stake above 10%, the company said as it disclosed the appointment in its proxy statement.
ICN’s proxy statement also included a proposal by the company’s No. 1 shareholder, Heartland Advisors, that would force Panic, 69, to retire from the board next year by imposing a mandatory retirement age of 70.
Heartland Advisors fund manager Eric Miller urged Panic to resign last week, saying that regardless of the merits of the SEC case, the Panic controversy has cast a shadow over ICN.
The SEC is seeking to bar Panic, who founded ICN and built it into Eastern Europe’s No. 1 drug maker, from working as an executive at a publicly held company.
ICN shares have fallen 3.6% so far this year, even though ribavirin, marketed by Schering-Plough Corp., is expected to become a big seller.
“The company is very much undervalued,” Miller said last week in an interview. “We think much of that stems from the legal issues and clouds that seem to follow Milan.”
ICN shares fell 63 cents Monday, to $21.19, in New York Stock Exchange trading. The company’s shares hit a 52-week high of $36.38 May 20.
Miller said that the stock would trade between $30 and $40 if Panic weren’t running the company. He based that projection upon his estimate that royalties from ribavirin would help the company report 1999 earnings of $1.50 a share and 2000 earnings of $2.50.
“As far as adding credibility and managing a day-to-day operating basis, I think ICN shareholders could do a lot better,” Miller said.
Shareholders will have a chance to vote on Heartland’s proposal at its Sept. 22 annual meeting. ICN urged shareholders to reject the mandatory retirement age as it did when Heartland filed a similar motion last year, company spokesman Terry Souers said.
Panic earned $2.04 million in salary and bonus in 1998, down 16% from 1997, according to the proxy. His pay fell in a year in which ICN lost $352 million, its stock fell 31% and the company settled two sexual harassment lawsuits filed against Panic.
“Milan Panic founded and built this company. It has a bright future,” Souers said. “He has an excellent management team behind him. We’re looking forward to increasing shareholder value in the weeks, months and years to come.”
The appointment of Batchelder increases ICN’s board to 16 directors. Batchelder also is a director of Idaho-based construction giant Morrison Knudsen Corp. and Houston oil and gas producer Nuevo Energy Co.
