Forest Laboratories Inc. (FRX) said its board has adopted a
shareholder-rights plan after activist shareholder Carl Icahn
recently increased his ownership stake in the company.
A rights plan, also known as a poison pill, often is used to
thwart potential hostile-takeover offers by giving other
shareholders the right to buy more shares at a discount if one
shareholder buys a certain percentage of the company's stock.
The drug maker said the rights plan is designed to ensure the
company's shareholders receive fair treatment in the event of any
proposed takeover as well as to "guard against abusive tactics" to
gain control of the company without paying shareholders a premium
for that control.
"After concluding a second proxy contest during which he
repeatedly--and erroneously--disparaged Forest's business model and
growth prospects, Mr. Icahn increased his already-significant
position in Forest with rapid open-market purchases," said Chairman
and Chief Executive Howard Solomon.
Mr. Icahn, who recently boosted his stake in the company to 11%,
wasn't immediately available for comment.
The rights plan would be triggered if a person or group acquires
12% or more of the company's stock, or 20% in the case of a 13G
institutional investor. Each right under the plan entitles
stockholders to buy one one-thousandth of a share of a new series
of junior participating preferred stock at an exercise price of
$100.
If Forest Labs is acquired in a merger or other deal after a
person has acquired 12% or more of the company's stock, or an
institutional investor has acquired 20% or more of the company's
stock, each right will allow its holder to purchase a number of the
acquiring company's common shares having a market value of twice
the exercise price. The acquiring person won't be entitled to
exercise these rights, the company said.
The plan will expire in 12 months unless ratified by
shareholders.
Mr. Icahn in June nominated four candidates to Forest's
10-member board, though only one of those candidates won a seat
after the company's annual shareholders meeting earlier this
month.
Mr. Icahn has recently criticized Forest Labs for failing to
disclose its latest warning letter from the U.S. Food and Drug
Administration for a violation of promotional practices by the
company's sales representatives regarding its drug Daliresp. He has
also recently alleged that Forest has built a poison pill into a
license pact it inked in 2004.
Shares closed at $34.69 and were unchanged after hours. The
stock is up 15% since the start of the year.
-Write to Nathalie Tadena at nathalie.tadena@dowjones.com
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