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Biogen Idec again in Icahn's sights

Billionaire says '07 attempt to find buyer was 'flawed'

Email|Print| Text size + By Todd Wallack
Globe Staff / January 29, 2008

Billionaire investor Carl Icahn stepped up his efforts yesterday to push Biogen Idec Inc. to find a buyer, saying last year's failed effort to sell the Cambridge biotechnology firm was "flawed."

Biogen Idec said Icahn's investment company, Icahn Partners LP, on Friday nominated three people to its board of directors. If they win seats on the board, that would give Icahn a powerful voice to continue pressing for a deal.

In addition, Icahn proposed that Biogen Idec amend its bylaws to require that the number of directors remain at 12, a step that would prevent the company from packing the board with loyal directors to dilute Icahn's influence. Icahn owns more than 4 percent of Biogen Idec's stock.

In October, Biogen Idec hired two investment banks to consider outside offers for the company, after receiving "expressions of interest" from Icahn and others. At the time, analysts predicted it would probably be sold to a major drug company, such as Novartis AG or Pfizer Inc., and Biogen Idec shares soared.

But the company took down the "for sale" sign in December, saying it had not received a single definitive offer - disappointing Icahn and other investors, who complained the sale process was so restrictive it shut out many potential suitors.

"We believe the process was flawed in a number of key respects," Icahn said in a prepared statement. He suggested it was a largely an attempt to appease him and other large shareholders, rather than a serious effort.

Specifically, he noted that Biogen Idec barred potential bidders from negotiating with Elan Corp, the Irish company that shares the rights to Biogen Idec's drug Tysabri, before submitting a binding offer. In addition, he complained the confidentiality agreement was so restrictive it warded off some potential bidders.

Biogen Idec defended the process. "We ran what can only be described as a comprehensive, thorough sale process that was in keeping with industry standards," said Naomi Aoki, a company spokeswoman.

At an investor meeting this month, Biogen Idec's chief executive, Jim Mullen, noted the sale process was handled by two experienced investment banking firms, Goldman Sachs & Co. and Merrill Lynch & Co.

And even though companies were barred from talking to Elan before submitting an offer, Mullen said, they had the right to talk to Elan before completing a deal. He likened it to making an offer to buy a home, contingent on a final inspection.

Icahn also said he was concerned about reports this month that Biogen Idec might be on the verge of making a major acquisition of its own, potentially complicating efforts to sell the company. Shares in Genmab A/S, a Danish biotech company, jumped 5 percent yesterday on speculation that Biogen Idec might buy it for at least $3 billion. Icahn vowed to use all available means to block "toxic" transactions.

Biogen Idec declined to comment on the acquisition rumors.

Icahn has nominated three people to Biogen Idec's board:

Alexander J. Denner, managing director of Icahn Partners.

Richard C. Mulligan, a genetics professor at Harvard Medical School.

Dr. Anne B. Young, a Harvard Medical School professor and chairman of the neurology service at Massachusetts General Hospital.

Denner and Mulligan already sit on the board of ImClone Systems, a New York biotech company Icahn won control of in 2006 after he launched a proxy fight. Last year, AstraZeneca PLC, a British drug maker, bought MedImmune, another biotech company, for $15.6 billion after Icahn sought a sale.

Still, J.P. Morgan analyst Geoffrey Meacham said Biogen Idec is "likely to resist a strong leadership stake from Icahn," setting up a potentially nasty shareholder battle between Icahn and the company's existing management. "We expect volatility in Biogen Idec shares, given what seems to be a looming proxy fight," Meacham said in a note to investors.

Biogen Idec has a staggered board, so only one-third of the seats are up for reelection this year, preventing Icahn from trying to take control immediately. But Icahn threatened to try to gain four additional seats next year - giving him control of the board - if management fails to do enough to "enhance shareholder value."

Icahn, who has a reputation for pushing companies to sell themselves or make other changes to boost their share prices, owned 12.4 million shares, or 4.2 percent, of Biogen Idec as of Jan. 25, up from 8.8 million shares on Sept. 30.

Biogen Idec has not said when it will hold its annual shareholder meeting, but it typically holds them in late May and files related voting documents in April.

If Biogen Idec is sold, Bear Stearns & Co. analyst Mark Schoenebaum said, the company could fetch roughly $80 a share, up from $58.13 yesterday. Otherwise, Schoenebaum said, the company is fairly valued at between $55 and $60 per share. Biogen Idec's shares fell 79 cents, or 1.3 percent, yesterday.

Last fall, Icahn also disclosed that he owns a small stake in Genzyme Corp., the largest biotech company based in Massachusetts. So far, Icahn has not publicly pushed for any changes at the Cambridge company.

Todd Wallack can be reached at twallack@globe.com.

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