Investment Group Buys 1.8% Stake in ICN, Acquires Options on More
A Cayman Islands investment group said Monday that it has bought a 1.8% stake in ICN Pharmaceuticals Inc. and acquired options to buy an additional 4.7% interest in the Costa Mesa drug maker and distributor.
Exercising the options would give Special Situations Partners Inc. 6.5% of the shares outstanding and make it the largest institutional investor in the company, surpassing Heartland Advisors with its 5.84% stake.
Special Situations, a subsidiary of Sterling Investment Group Ltd. in London, paid $30.6 million to acquire nearly 1.4 million shares between Sept. 23 and Monday, according to a document the group filed with the Securities and Exchange Commission.
The investment group also paid $1.5 million to acquire options to buy nearly 3.7 million shares at prices ranging from $15 to $55 a share.
The purchase, welcomed by beleaguered ICN Chairman Milan Panic, comes as the company’s stock has been starting to rebound in the past month from a devastating four-month dive that cut the company’s market value in half.
Heartland lost a bid in September to oust Panic. Both ICN and Panic are being sued by the SEC and investigated by a federal grand jury.
Special Situations, controlled by Dr. Tito Tettamanti, a Swiss native living in London, said in the document that ICN shares are “underpriced compared to their intrinsic value.”
The investment group blamed the undervaluation on the stock market’s “negative perception and lack of understanding of the company’s Eastern European business,” which it called a “valuable and attractive asset with considerable potential.”
The perception and misunderstanding of ICN’s global business has led to a “a very substantial diminution” in the market’s value of the company’s remaining business, particularly in North America, the group said.
The statements, however, didn’t spur the market immediately. The stock closed Monday at $26 a share, down 38 cents from Friday. The stock was at $33.50 on June 23 when the slide began, and hit $16.75 on Oct. 5.
As part of its investment, Special Situations also received $1.1 million in return for writing put options that provide other investors the right to sell 155,000 shares to the group at $25 to $35 per share, according to the filing.
Panic said in a separate press release that the investment reflects the company’s growing international presence and its appeal to foreign investors.
The SEC in August accused Panic and other executives of misleading investors about an unsuccessful attempt to win Food and Drug Administration approval for the drug ribavirin.
The FDA, which turned down ICN’s application in November 1994, eventually cleared ribavirin for treatment of hepatitis C in June 1998 as part of a combination therapy that includes Schering-Plough Corp.’s Intron-A. Schering-Plough markets the treatment and pays royalties to ICN.
