ICN Chief Proposes Spinning Off 2 Divisions Completely

ICN Pharmaceuticals Inc.’s chief executive is floating an idea for spinning off two divisions completely as an alternate way to break up the Costa Mesa drug maker, a move that could appease dissident shareholders.

Milan Panic said the new plan would greatly enhance shareholder value and reduce the company’s role in the two spinoffs. Under a current proposal, the company would still own 80% of each division after they go public.

Panic’s latest idea, though, was met with skepticism and derision by some of the dissident ICN shareholders, who previously have tried to oust him or reduce the role of the 70-year-old founder.

“I think it’s a step in the right direction, but only if he does it. And that’s a big ‘if,’ ” said Eric Knight, managing director of Cayman Islands-based Special Situations Partners Inc., which owns a 4% stake in ICN.

Under a reorganization proposed in June, ICN would shed 20% of its European and Pacific Rim operation, to be called ICN International, and a like amount of its research arm, which would be called Ribapharm Inc. The Orange County company would own the rest of the stock of both companies.

Analysts believe ICN’s parts are worth more than the whole. Richard Stover at Arnhold & S. Bleichroeder investment firm in New York said Ribapharm alone could be worth $2.5 billion to $4 billion, more than ICN’s market capitalization of $2.3 billion, based on Friday’s closing price of $29.13 a share.

Originally, Panic was going to be chairman of all three, but he said in August that he would not head up Ribapharm. This week, he said in an interview that it was “unlikely” he would become chairman of ICN International, either.

In the interview, Panic said ICN would change the structure of the reorganization by giving shareholders the remaining stakes in the form of stock dividends. He did not say when the change could occur.

But that sort of spinoff creates big tax burdens both for the company and the shareholders, said one dissident, who asked to remain anonymous.

Panic said that distributing stakes in the new companies as dividends would be subject to tax considerations, as well as approvals from shareholders and the Securities and Exchange Commission.

“That shows my commitment to shareholder value,” Panic said.