Pierre Legault was elected to Forest’s 10-member board, according to a preliminary tally of shareholder votes released at the company’s annual meeting today in New York. Legault is chief executive officer of Stone Management LLC and former finance chief of OSI Pharmaceuticals Inc.
Icahn, the second-largest shareholder, had nominated four directors to New York-based Forest’s board in his second proxy fight in as many years. The 76-year-old investor has said Forest didn’t adequately prepare for the loss of patent protection on its top-selling drug, the antidepressant Lexapro, and questioned the potential for the son of CEO Howard Solomon to succeed him.
Solomon called Icahn today to congratulate him on the results, the investor said.
“It was a nice gesture on his part,” Icahn said in a telephone interview today. “We both agreed it’s better to have peace than war, and we’ll both try to work together if we can.”
Forest declined less than 1 percent to $33.88 at 4 p.m. New York time.
Legault replaces Dan Goldwasser, who had served on the board since 1977.
“It’s a great victory for corporate governance,” said Dan Ninivaggi of Icahn Enterprises LP (IEP), one of the three Icahn nominees who weren’t elected. “The company spent millions of dollars to oppose our slate, they fought us in court. Yet we still won.”
Icahn failed to get any of his four nominees on the board last year. Eric Ende and Andrew Fromkin were the other Icahn nominees this year.
“The board is ready to welcome Pierre Legault with open arms,” Frank Perier, Forest’s chief financial officer, told reporters after the meeting. “We welcome his contributions.”
Icahn has said Forest would make an “excellent” acquisition for a larger drugmaker. Perier declined to comment on that assertion.
“Our board has always and will always consider potential transactions presented to them from a maximizing shareholder value standpoint,” Perier said.
Icahn won the support of Institutional Shareholder Services Inc., a proxy adviser, for Ninivaggi and Legault earlier this month. Glass Lewis & Co., another adviser, backed all of Forest’s 10 directors, while Egan-Jones Proxy Services, a third, recommended all four of Icahn’s nominees.
The two sides have traded blows since Icahn announced his intention to nominate directors in May. The investor criticized the loss of shareholder value as Forest’s stock declined from a high in 2004 of $77.59 to close at $33.98 yesterday, and said he planned to investigate stock sales made by CEO Solomon.
Forest countered that Icahn has ignored the progress the company has made in the last year, such as bringing drugs to the market and filing for approval of others.
“The election of only one of Mr. Icahn’s four nominees reflects our shareholders’ continued confidence in Forest’s strategy, corporate governance practices and the strength of our pipeline and portfolio of products,” Kenneth Goodman, Forest’s presiding independent director, said in a statement today.
Icahn said he would like to see Forest add more outside board members.
“We tried to get four guys on, so we do think there should be additional outside board members to make for better corporate governance,” Icahn said by telephone today.
Icahn has a track record of investing in drugmakers and profiting from their turnarounds or sales to larger companies. He invested in ImClone Systems Inc., which was sold to Eli Lilly & Co. (LLY) in 2008 for $6.5 billion; Genzyme Corp., sold to Sanofi for $20.1 billion last year; Amylin Pharmaceuticals Inc., which agreed to be bought by Bristol-Myers Squibb Co. (BMY) for $5.3 billion on June 29; and Biogen Idec Inc. (BIIB), whose stock has more than doubled in the last two years.
Icahn’s head of biotechnology investing, Alex Denner, left the firm last year to start his own hedge fund. He and Richard Mulligan, a genetics professor at Harvard Medical School, worked with Icahn on many of his investments in drugmakers.
Asked whether he would support the addition of Denner or Mulligan to Forest’s board, Icahn said he would.
“I’d love to see Denner and Mulligan get on the board even as additions,” Icahn said. “They did a great job at Biogen and I’ve seen them work, and they did a great job at ImClone.”
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