ICN Announces Restructuring; Stock Plunges
Reacting to shareholder pressure to enhance its stock value, ICN Pharmaceuticals Inc. said Thursday that it will reorganize operations, spinning off two units as publicly traded companies but retaining majority control in both.
The long-awaited decision disappointed investors, who had hoped the Costa Mesa drug maker would at least sell its European operations. Shares fell 20%--the stock’s biggest one-day percentage drop in more than five years--as investors and analysts scoffed that the change accomplishes little.
“They didn’t give us much to get excited about,” said Eric Miller, portfolio manager with Heartland Advisors Inc., ICN’s largest single investor. “It’s basically some convoluted financial engineering that leaves the basic corporate structure intact with no substantive changes.”
But Milan Panic, the company’s founder and chairman, said time will prove the plan to be right.
“The stock market is not perfect short term,” Panic said. “But what we are doing is correct. I am confident it will increase the stockholders’ value.”
The stock lost $6.81 to close Thursday at $27.50 a share on the New York Stock Exchange.
ICN has been facing demands from shareholders to spin off or sell its operations, particularly in Eastern Europe, where the company lost hundreds of millions of dollars because of the region’s economic and political volatility.
Those problems have been a drag on strong sales of ribavirin, ICN’s signature drug used in a combination treatment for the highly contagious liver disease hepatitis C. The European operation also has been cited as the reason ICN shares have languished the last few years.
Under the restructuring, ICN will create Ribapharm Inc. as its research and development arm and fund it with the royalty stream from ribavirin, which made $110 million last year. Ribapharm, which will hold the patent to ribavirin, will take over ICN’s headquarters, and the parent company will move, probably to New York.
ICN will retain an 80.5% stake in Ribapharm and sell the remaining interest on Wall Street for what could be $250 million, an estimate used only to calculate the fee for filing Ribapharm’s initial public offering with the Securities and Exchange Commission.
The parent company also will create ICN International, to be based in Moscow, to oversee Eastern and Western European and Pacific Basin operations.
Besides acting as the parent company, ICN Pharmaceuticals will oversee all operations in the Western Hemisphere, primarily North and Central America.
