Exclusive: Forest, battling Icahn, eyes activist's ex-aide

Thu Aug 9, 2012 4:54pm EDT

Investor Carl Icahn speaks at the Wall Street Journal Deals & Deal Makers conference, held at the New York Stock Exchange, June 27, 2007. REUTERS/Chip East

Investor Carl Icahn speaks at the Wall Street Journal Deals & Deal Makers conference, held at the New York Stock Exchange, June 27, 2007.

Credit: Reuters/Chip East

(Reuters) - Forest Laboratories (FRX.N), at the urging of its shareholders, has had informal discussions with former Carl Icahn aide Alexander Denner about joining its board, a surprise move aimed at resolving its bitter proxy battle with the billionaire investor, according to sources familiar with the situation.

Icahn, Forest's second-largest shareholder with a stake of about 10 percent, has nominated four people to the company's board as he wages his second proxy battle in as many years against the maker of antidepressant Lexapro and Alzheimer's drug Namenda.

Denner, who left Icahn's firm last year to start his own hedge fund, has spearheaded all of Icahn's successful proxy fights in the healthcare sector over the last six years. He was one of Icahn's nominees to Forest's board last year but is not on this year's slate.

Some influential shareholders of Forest are now asking the company to offer Denner a board seat, and the company is considering the idea, the sources said.

Forest shareholders are due to vote on the board's composition at the company's annual meeting on August 15

Forest, Icahn and Denner all declined to comment.

That a number of influential shareholders are pressing Forest to accept Denner indicates that while they may want to see change at the company, they are not necessarily enamored of Icahn's slate.

And it suggests investors may be skeptical about whether Icahn can be successful in healthcare without Denner, who has helped him make roughly $2 billion in the last six years.

Striking such a deal, however, is complicated. It is not clear if Denner or Icahn would want such a deal as Denner is establishing his own hedge fund and does not currently have an economic interest in Forest.

And Icahn is unlikely to agree to a deal under which only one of his representatives is accepted onto the board since he has already gained support for two of his nominees from the influential proxy advisory firm Institutional Shareholder Services, which many institutional investors rely on when casting their votes.

If Icahn were to agree to such a deal, it is almost certain he would insist that the company also accept Richard Mulligan, a professor of genetics at Harvard University who has worked closely with Denner on most of Icahn's investments and has joined Denner at his hedge fund.

Denner and Mulligan led proxy contests for Icahn at ImClone Systems, Biogen Idec Inc (BIIB.O) and Genzyme Corp, which was sold to Sanofi for $20 billion. Those who have worked with the two say they bring a unique set of skills to the process that will not be easy to duplicate. <ID: nL2E8IO416>

To the Forest board Icahn has nominated Daniel Ninivaggi, president of Icahn Enterprises; Eric Ende, a former analyst at Merrill Lynch; Andrew Fromkin, former chief executive of Clinical Data; and Pierre Legault, a former executive at several big drugmakers as well as a small biotech.

Forest has rejected Icahn's nominees, arguing that they would not add any value to its board. It has said that Ende and Fromkin also have conflicts of interest, making them unfit for board positions.

Glass Lewis & Co, another influential proxy advisory firm, has backed Forest's entire slate of 10 board nominees, rejecting Icahn's entire slate.

Forest's shares closed up 0.2 percent at $33.47 on the New York Stock Exchange.

(Reporting By Toni Clarke in Boston and Paritosh Bansal in New York; Editing by Gary Hill and Steve Orlofsky)

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