Investor Carl Icahn formally started a proxy fight Thursday against generic drug maker Mylan Laboratories Inc.'s plans to buy rival King Pharmaceuticals Inc., calling the deal too expensive.
In a filing with the Securities and Exchange Commission, the billionaire shareholder activist urged Mylan shareholders to vote against the $3.37-billion deal for King, saying the purchase premium "is not justified."
Icahn disclosed Sept. 17 that he held an 8.9% stake in Mylan and said he planned to lead a proxy fight against the deal.
UBS Global Asset Management, another Mylan shareholder, this week also said publicly that it opposed the all-stock merger. And the merger "spreads" -- the difference between a target's stock price and the offered price -- closed at a wide 39% on Wednesday, meaning many investors believe the merger won't be completed.
King shares fell 21 cents to $11.26, while Mylan shares fell 33 cents to $17.43, both on the New York Stock Exchange.
"The spread between Mylan and King has widened. If people thought the deal was going to go through, King should be trading north of $15," said Timothy Chiang, an analyst with Natexis Bleichroeder Inc.
In the SEC filing, Icahn offered a point-by-point rebuttal of Mylan's reasons for the merger and called on Mylan shareholders to vote against the company's plans to issue new stock for the King purchase at a special shareholder meeting.
Icahn also disclosed that he had a "short" position in King, meaning that he was betting that King stock would fall, a high likelihood if the merger failed. However, Icahn said the King short position was less than 15% of the value of his Mylan holdings.
A Mylan representative could not be reached for comment.