3 Dissidents Win Seats on ICN Board
Dissident investors in ICN Pharmaceuticals Inc. dealt a blow Wednesday to controversial Chairman Milan Panic by winning a shareholder vote to put three insurgents on its board, setting the stage for a quicker breakup of the Costa Mesa drug maker.
The corporate setback may be the biggest the 71-year-old Panic has suffered since starting ICN in his garage in 1959. With his iron-willed leadership, he has fought through government investigations, sexual harassment accusations and two attempts by unhappy shareholders to limit his power.
Wednesday’s rebuke puts directors unfriendly to Panic, plus a fourth the company may be forced to add under a previous agreement, in position to speed the long-stalled plan to split the company into three entities--and make sure Panic has no role in running the two U.S. offshoots.
“Clearly, the shareholders are ready for a change and seem frustrated with the way things are going,” said Tom DesChamps, an analyst with Mehta Partners in New York.
Panic “now has board members accountable to shareholders,” said Eric Knight, managing director of Special Situations Partners Inc., a Cayman Islands institutional investor that led the insurgents’ efforts.
The group said it apparently won more than two-thirds of the votes cast, but the final tally won’t be known for two to three weeks.
Panic remains in control of the 12-member board, though dissidents promise to return next year with another slate of nominees if management doesn’t move quickly to carve up the company.
The vote barely registered on Wall Street. ICN shares lost 14 cents to close at $29.71 on the New York Stock Exchange.
In conceding defeat, Panic said he had underestimated his opponents, but he minimized the magnitude of the loss. Barely containing his rising voice, he said he hoped the new directors would discharge their duties constructively and warned they would face the “challenge of Panic” if they did not.
Panic seems to have been damaged, said Brian Burwell, managing partner at Marakon Associates in San Francisco, an international shareholder consulting firm.
“When you lose that kind of fight, it’s hard to see how you can last without some form of special protection,” he said.
Panic, who defected from Communist Yugoslavia and returned after the fall of Communism to serve briefly as its prime minister in the early 1990s, vowed to continue to play an important role in ICN.
Whatever happens to him, he won’t be going away poor. Upon retirement, he can serve as a company consultant for the rest of his life for about $577,000 a year, according to a document filed with federal regulators. If terminated, he could walk away with $10.4 million plus the consulting fees.
In voting for the dissident slate, shareholders rejected an impressive management slate consisting of Occidental Petroleum Chief Executive Ray R. Irani, former Canadian Prime Minister Kim Campbell and powerful Los Angeles lawyer Charles T. Manatt, a former Democratic National Committee chairman and former U.S. ambassador to the Dominican Republic.
The nominees elected are former Air Force Chief of Staff Ronald R. Fogleman, former Wisconsin Central Transportation Co. Chairman Edward A. Burkhardt and PolyMedica Corp. Chairman Steven J. Lee.
Dissident shareholder William J. Nasgovitz, president of institutional investor Heartland Advisors Inc. in Milwaukee, said he thought the infusion of fresh and independent blood would expedite ICN’s restructuring, to everyone’s benefit.
Three years ago, Nasgovitz’s group spearheaded an unsuccessful attempt to require all ICN directors to retire at 70, a proposal aimed at Panic.
The vote seemed well-known to insiders just before the annual meeting began Wednesday morning at ICN headquarters.
About 25 dissidents huddled to the side of the 150-seat hall, sharing laughs and jokes. When asked how the protesters would fare, Herbert Denton of Providence Capital Inc. in New York flashed a smile and said: “What do you have in California? I believe they’re called landslides.”
By contrast, ICN directors looked glum as they took their places on the dais. Panic showed little emotion as David Watt, ICN’s general counsel, revealed the preliminary results. He did not disclose a margin of victory.
Panic cited “misunderstandings” sown by the dissident group. He told shareholders that ICN has never deviated from its commitment to the reorganization, but he said it has been hamstrung by a weak stock market, the complexity of the plan and ICN’s debt.
Under the plan, ICN would create Ribapharm Inc. as an independent research and development company with rights to royalties from its prize drug, Ribavirin, which is used in a combination to treat the liver disease hepatitis C. ICN also would form ICN Americas to sell skin-care and other products in North and South America, and ICN International, which Panic would head, to oversee operations in Europe, Asia and Africa.
The proxy fight had been punctuated by personal attacks, lawsuits and recriminations.
Last week, the company took out a newspaper advertisement that was essentially a political-style attack ad. It was part of $4 million--almost 20% of what the company spent on research and development last year--that the company expected to spend on the proxy battle, according to a document it filed with regulators. The dissident group said it allocated $900,000 for the contest.
The company also has struggled lately. It posted two disappointing quarters, reporting lower profits as costs rose and royalty revenue from ribavirin sales declined.
In addition, Panic lost a nonbinding shareholder vote last fall that called for more independent directors, and more recently lost the backing of the influential Institutional Shareholder Services, a shareholder advisory group that endorsed the dissident slate. The group said ICN’s candidates might not offer “aggressive independent oversight.”
Though Panic built ICN into a company with $800 million in sales, his tenure often has been overshadowed by charges of corporate mismanagement and personal misconduct.
