SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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ICN Pharmaceuticals, Inc.
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(Name of Registrant as Specified in Its Charter)
ICN Committee to Maximize Shareholder Value
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UNLOCKING VALUE AT ICN PHARMACEUTICALS, INC.
Dear Fellow Shareholders,
We are the ICN Committee to Maximize Shareholder Value. Our members own over 3
million ICN shares, valued at over $90 million. As significant shareholders we
believe our interests are aligned with yours. We urge you, after carefully
reading our proxy material, to vote "FOR" our nominees for the Board of
Directors of ICN on the GOLD proxy card today!
We believe that ICN's shares are undervalued. ICN and its Chairman, Milan Panic,
have long acknowledged that they share this view.
The Right Answer
On June 15, 2000, almost one year ago, ICN announced a plan to reorganize ICN
through initial public offerings of two of its business units - Ribapharm and
ICN International. However, this June Plan would have left both of these
companies as majority-owned subsidiaries of ICN under the continuing control of
Mr. Panic and ICN's current management.
The price of ICN's stock plummeted by almost 25% within days following the
announcement of the June Plan.
Last October, as part of a legally binding agreement with SSP-Special Situations
Partners (a member of the Committee), ICN announced significant revisions to the
June Plan committing publicly to divide ICN into three completely separate
companies by means of tax-free spin-offs of Ribapharm and ICN International.
ICN at this time also committed that each of these companies would be
independently managed and would have a truly independent board of directors -
with a much reduced management role for Mr. Panic.
We think the October Agreed Plan is the right answer for
unlocking value at ICN.
We believe ICN's stock remains undervalued today because Milan Panic and the
incumbent ICN Board have not demonstrated to investors convincing, tangible
progress in effecting the October Agreed Plan.
Sidelined!
In mid-March Mr. Panic was still saying ICN's restructuring would proceed "as
expeditiously as possible." Just six weeks later, in his May 1st letter to
shareholders, he made it clear: ICN is now waiting "on the sidelines" until the
markets recover.
We believe ICN is hiding behind the market. We suspect, despite their
protestations to the contrary, that Mr. Panic and ICN's Board do not intend to
deliver on their October commitments and that Mr. Panic does not intend, any
time soon, to relinquish control of any of ICN's businesses.
We believe public offerings of Ribapharm and ICN International are not the
crucial elements of the October Agreed Plan. We believe the crucial elements of
the October Agreed Plan are the complete separation of ICN, Ribapharm and ICN
International from each other as soon as possible through tax-free distributions
- and a reduced role for Milan Panic.
If market conditions for the foreseeable future preclude the long-promised
public offerings, we believe ICN can and should move forward by seeking the
necessary tax rulings and debtholder consents - and distributing 100% of
Ribapharm to ICN stockholders as soon as possible.
WE NEED YOUR SUPPORT TO ELECT DIRECTORS COMMITTED TO
ENHANCING SHAREHOLDER VALUE - WITHOUT UNNECESSARY DELAY
This year you can help elect to ICN's Board three stockholder-nominated
directors who are wholly independent of Milan Panic and incumbent management.
Our nominees, General Ronald R. Fogleman (USAF Ret.), Edward A. Burkhardt and
Steven J. Lee, are committed to executing the restructuring as announced in
October and the prompt pursuit of increased stockholder value.
Your Vote is IMPORTANT
We Urge You to Cast Your Vote "FOR" The Committee's Nominees
If you have any questions or need help voting your shares, please call:
[Mackenzie Partners, Inc. logo]
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, NY 10010
email: proxy@mackenziepartners.com
Call Collect: (212) 929-5500
or Toll Free: (800) 322-2885
Facsimile: (212) 929-0308
ICN'S STOCK REMAINS UNDERVALUED
The Committee believes that ICN's stock price remains substantially undervalued
after nearly a year of promises by management to restructure ICN. For example,
applying the earning multiples of the five companies used as a peer group by ICN
in its annual proxy statements to ICN's stock implies a potential valuation of
close to $50 per share - almost double the closing price of $24.78 on April 20,
2001.
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Price Trailing 12-Month Forward 12-Month
Peer Group(1) Ticker FYE 04/20/01 P/E Ratio P/E Ratio
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Allergan AGN 12/31 $77.80 48.6x 40.7x
Alza(2) AZA 12/31 $36.35 44.9x 36.5x
Forest Laboratories (Class A) FRX 03/31 $60.88 60.6x 40.4x
Mylan Laboratories MYL 03/31 $26.05 24.8x 20.2x
Watson Pharmaceuticals WPI 12/31 $49.06 40.9x 21.8x
Average P/E Ratio 44.0x 31.9x
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ICN Pharmaceuticals ICN 12/31 $24.78 21.7x 16.5x
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Implied values for ICN
Based on Trailing 12-Mo P/E $50.11 44.0x
Based on Estimated '01 P/E $47.87 31.9x
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Source: Bloomberg L.P.
LOSS OF CONFIDENCE IN MILAN PANIC AND ICN'S BOARD
The Panic Factor
The Committee believes that Mr. Panic's attitude toward ICN shareholders, as
well as much-publicized past and present run-ins with the Securities and
Exchange Commission, ICN employees, Schering-Plough and others dating back years
and continuing today, have sapped investor confidence in ICN and lie at the root
of ICN's discounted market valuation. Consider:
o Mr. Panic's Attitude Towards ICN Stockholders. "They are stupid, stupid,
stupid people . . . [s]tockholders who get involved with what I do are
speculators, manipulators, and sometimes blackmailers."
Mr. Panic, quoted in
Bloomberg Markets Magazine
August 28, 2000
(1) The Peer Group consists of the five companies used by the ICN Board to
assess ICN's performance. Source: ICN's Proxy Statement dated May 1, 2001, and
ICN's Proxy Statement dated November 27, 2000.
(2) Alza's price is calculated by taking an average of the closing price for the
25 days beginning February 20 through March 26, 2001. On March 27, 2001, Alza
entered into a merger agreement with Johnson & Johnson.
o Problems with the SEC Past and Present. SEC complaints have led Mr. Panic to
sign two consent decrees with the SEC, one in 1977 and another in 1991.
While neither denying nor admitting guilt, in signing the consent decrees
Mr. Panic pledged "not to violate securities laws in the future."
The Wall Street Journal
April 6, 2000
Another SEC complaint, filed in 1999, is currently pending against Mr.
Panic, ICN and other ICN officers alleging they took actions that "operated
as a fraud and deceit upon other persons" in violation of the securities
laws. In this action, the SEC is seeking an order barring Mr. Panic from
acting as an officer or director of any publicly-traded company.
ICN has recorded a $9.25 million reserve in connection with this proceeding
and a related federal grand jury investigation.
ICN Pharmaceuticals, Inc. Form 10-K
for the year ended December 31, 2000
o Problems with Employees. "Seven former female employees have won settlements
for [Milan Panic's] alleged sexual harassment, four in state court . . . and
the others after internal procedures."
The Wall Street Journal
April 6, 2000
In 1996 ICN made a loan of $3,500,000 to Milan Panic for the settlement of
litigation involving a claim by a former ICN employee of alleged sexual
harassment by Milan Panic and ICN.
ICN Proxy Statement
May 1, 2001
o Disputes with Schering-Plough. In November 2000, ICN gave Schering-Plough,
one of ICN's key business partners, options and rights of "first/last
refusal" over a group of ICN products "as part of the resolution" of claims
by Schering-Plough that ICN had breached their license agreement.
ICN has now disclosed a new dispute with Schering-Plough over the royalties
payable under this important license agreement with a potential material
impact on ICN's results of operations.
ICN Pharmaceuticals, Inc. Form 10-K
for the year ended December 31, 2000
Panic's Board?
The Committee does not believe that the incumbent Board of ICN - none of whom
were nominated by shareholders - is as independent of Mr. Panic and ICN's
management as it should be or that they have sufficient incentive to dedicate
themselves to maximizing shareholder value. Consider:
o A Vested Interest in the Status Quo? ICN's "[d]irectors get . . . a larger
annual award than provided by 349 of 350 big and midsize concerns surveyed
by pay consultants William M. Mercer Inc. last year [1999]." "Mercer
estimates the initial per-director value of the 1999 and 1998 [option]
grants at $410,803 and $653,222, respectively."
The Wall Street Journal
April 6, 2000
o Insignificant Shareholdings. Excluding their unexercised company-granted
options, the ten incumbent non-management directors own, collectively, a
total of only 9,366 ICN shares and five of them (including two of this
year's three management nominees) own no shares at all.
ICN Proxy Statement
May 1, 2001
By contrast, the members of the Committee own over 3 million ICN shares,
valued at over $90 million (the Committee's nominees have personally
invested $6.0 million in ICN stock and own 276,000 shares). These
investments strongly align the economic interests of our slate with other
stockholders.
Other shareholders also want a more independent board:
o Heartland Advisors, Inc. "Among Heartland's concerns are . . . [a] lack of
investor confidence in the present Board which Heartland believes is due to
its demonstrated inability to act independent of Company management and
several past Board actions that raise serious conflict of interest
concerns." (emphasis added)
Heartland Advisors, Inc. Schedule 13D
July 6, 2000
o TIAA-CREF. At ICN's 2000 annual meeting of stockholders, a mere four months
ago, TIAA-CREF proposed a resolution expressing the view that ICN's Board
structure and composition raise "serious questions" about the Board's
capacity to act independently of management and requested ICN adopt a policy
that a substantial majority of its directors are independent. The incumbent
Board opposed this resolution.
ICN 2000 Proxy Statement
November 27, 2000
o Holders of 18.5 Million Shares. ICN's shareholders, rejecting management's
recommendation, voted in favor of, and passed, the TIAA-CREF 'Board
Independence' resolution by a wide majority: 18.5 million votes "For" versus
12.6 million votes "Against."
ICN Pharmaceuticals, Inc. Form 10-K
for the year ended December 31, 2000
THERE IS A SOLUTION
We think the October Agreed Plan is the right answer for unlocking value at ICN.
We believe that the crucial elements of this plan are:
The complete separation of ICN, Ribapharm and ICN International from
each other as soon as possible with separate managements and truly
independent Boards.
Tax-free distributions to the ICN stockholders of ICN's entire
remaining interest in Ribapharm and ICN International.
A reduced managerial role for Milan Panic with no role at Ribapharm and
no executive position at ICN Americas.
However, more than one year has passed since ICN first announced a restructuring
plan, more than six months have passed since ICN publicly committed to the
October Agreed Plan, and still the promised restructuring of ICN not only
remains unfinished - it has to a large extent not even begun.
And now Mr. Panic has made it clear in his May 1, 2001 letter to shareholders:
ICN is waiting "on the sidelines" until the markets recover.
We believe public offerings of Ribapharm and ICN International are not the
crucial elements of the October Agreed Plan.
If market conditions for the foreseeable future preclude the long-promised
public offerings, we believe ICN can and should move forward by seeking the
necessary tax rulings and debtholder consents - and distributing 100% of
Ribapharm to ICN stockholders as soon as possible.
WHAT CAN YOU DO?
This year shareholders have the chance to elect shareholder-nominated directors
dedicated to maximizing shareholder value.
The Committee's Nominees
Unlike the slate proposed by ICN, the Committee's nominees were not chosen by
Milan Panic and the other incumbent members of ICN's Board. The Committee's
slate includes:
o General Ronald R. Fogleman - Retired Chief of Staff of the United States
Air Force.
o Edward A. Burkhardt -Founder and former CEO of Wisconsin Central
Transportation Corporation.
o Steven J. Lee - CEO and founder of Polymedica Corporation.
The Committee's nominees are committed to executing the October Agreed Plan.
Once on the Board, the nominees will pursue diligently and promptly the October
Agreed Plan and any other actions necessary to maximize shareholder value, and
they will not stand for further unnecessary delay.
Send a Message to Mr. Panic and The ICN Board
In its October agreement with ICN, SSP also won agreements from ICN about the
timing of the next two annual meetings and the size of the Board, expressly to
provide shareholders with the means of exercising their franchise effectively to
enforce ICN's public commitments regarding the restructuring plan and related
matters.
This year you can help elect to the Board a group of truly independent,
stockholder-nominated directors who are wholly independent of Milan Panic and
incumbent management and are dedicated to the prompt pursuit of increased
stockholder value.
This year you can send a strong message to ICN and the remaining directors of
the seriousness with which ICN stockholders take both the need for Board
independence and the Board's prior commitments regarding the enhancement of
stockholder value.
We urge you to read the Committee's Proxy Statement
Your Vote is IMPORTANT - Cast your Vote "FOR" the Committee's Nominees
The ICN Committee to Maximize Shareholder Value
May 3, 2001
If you have any questions or need help voting your shares, please call:
[Mackenzie Partners, Inc. logo]
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, NY 10010
email: proxy@mackenziepartners.com
Call Collect: (212) 929-5500
or Toll Free: (800) 322-2885
Facsimile: (212) 929-0308