The increasingly hostile relationship between Forest Laboratories and Carl Icahn has seen the company’s chief executive launch another attack on the billionaire investor.
A week ago, Mr Icahn, who is staging a proxy fight to get four seats on the board, demanded access to documents regarding Forest’s succession plans and other governance issues. He focused in particular on whether chairman and chief executive Howard Solomon, 84, plans to hand over the reins to his son David Solomon, whom he claims is lacking the experience necessary for such a role.
Mr Icahn, who is Forest’s second-largest shareholder with around 10% of the stock, claimed that Solomon junior’s only senior level executive experience “has come from working for his father – prior to that, David was in the business of making movies”. He added that Forest “is not a dynasty to be despotically handed down from father to son”.
This has prompted a response from Harold Solomon who has written to Mr Icahn saying that “we have consistently said that we were open to constructive discussions with you regarding how to build value for all of our shareholders. However, you have never made an effort to engage with us outside the context of a proxy contest – and your discourse thus far has shown a striking lack of strategic ideas”.
‘Innuendo and distortion of facts’
Instead, he adds, “it has been replete with wild and baseless accusations, innuendo and distortion of the facts. It is truly unfortunate that you have seen fit to conduct yourself in such a manner, but as you have continued to do so publicly, I feel compelled to set the record straight”.
In the lengthy letter, Mr Solomon defended his record at the helm of Forest and the role of his son. He said that “I did not anticipate that my son David would be publicly disparaged and caricatured by someone utterly ignorant of even the slightest information about his qualifications or performance”.
Sons’ business records in spotlight
He went to say that during his more than eleven-years, son David’s work, particularly as head of corporate development and strategic planning, “has greatly contributed to our strong product position today”. Mr Solomon then commented on the career path of Mr Icahn’s son Brett who “following his ‘movie making’ career”, was elevated “not only to executive positions within your organisation, but also to positions of responsibility to shareholders as a director of public companies”, some of them being firms in which Mr Icahn had a controlling stock position.
In contrast, Mr Solomon says that “at Forest our succession process is firmly in the hands of our independent directors and their advisors. David will neither be favoured nor handicapped because of his relationship with me. The qualifications of our sons should speak for themselves”.
Ahead of what is likely to be a high-octane annual meeting on August 15, Mr Solomon went on to criticise Mr Icahn’s choices to sit on the board, if successful. He said “for a self-styled corporate governance guru, you have puzzlingly compiled a roster of candidates that are far less qualified than our current board members, and in some cases, lack the very independence you claim our slate is lacking”.
He took aim in particular at Eric Ende, who received the fewest number of votes of any of the 14 director nominees put up for election last year. Mr Icahn has “an unorthodox profit-sharing arrangement” with Mr Ende who stands to pocket 1% of Mr Icahn’s profits over a price of $47.50 per share of Forest, if the latter were to sell his shares.
Icahn responds
Mr Icahn responded, in an interview with Reuters, by saying that that prior to launching the latest proxy fight, he told Mr Solomon he was prepared to add just two of his nominees to the board. “I certainly, as the second-largest shareholder, would like to avoid a proxy fight” and insisted he had no desire take control of Forest. However, Mr Solomon “called me back. He just said: ‘the board doesn’t want you on.’ And that was the end of it.”
