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Billionaire Icahn Sells Bulk of Shares Back to Mylan

Posted on: Wednesday, 20 July 2005, 00:00 CDT

Jul. 19--Billionaire investor Carl Icahn confirmed yesterday he was selling most of his stake in Mylan Laboratories, relieving pressure on management of the Canonsburg generic drug maker and sending its shares down 5 percent.

Icahn tendered his shares under the terms of an auction Mylan organized to purchase up to $1 billion of its stock from shareholders. The auction ended Friday with investors offering more shares than Mylan was willing to purchase. That means Icahn will be able to sell 24.7 million of the 26.3 million Mylan shares he owns.

He will gross an estimated $70 million profit from that transaction based on the average share price of $17.46 he paid and $19.50, the top price Mylan will pay at the auction.

In a statement, Icahn stopped short of saying he's finished trying to reform Mylan by nominating his own slate of directors and pressuring Chief Executive Officer Robert J. Coury. However, with Mylan shares closing off $1.02 at $18.38 yesterday, many investors are concluding Mylan's largest shareholder is more raider than crusader.

"He's out. He's gone," said Greg Melvin, chief investment officer of C.S. McKee, Downtown. "He doesn't care about you or me or any other Mylan shareholder."

Mylan spokesman Patrick Fitzgerald blamed yesterday's stock slump on the outcome of the auction rather than news the U.S. Food and Drug Administration was investigating the deaths of patients who used skin patches containing fentanyl, a narcotic used to relieve chronic pain.

Mylan won FDA approval to offer the generic version of the patch in January. Johnson & Johnson makes Duragesic, the brand-name version.

Icahn said the FDA announcement was one factor in his decision to sell.

He has long been a thorn in the side of underperforming U.S. companies, many times forcing management to get rid of him by repurchasing his shares at above-market prices. What some believe is the concluding chapter of his story at Mylan is similar to the outcome of his battle with Kerr-McGee earlier this year. The Oklahoma oil company repurchased $4 billion of its shares in May after Icahn dropped a threat to nominate two directors.

Yesterday, Icahn took credit for a 32 percent increase in Mylan's stock price since last summer, when he began accumulating a 9.8 percent stake to block its proposed $4 billion purchase of Bristol, Tenn.-based drug maker King Pharmaceuticals. Mylan walked away from the King deal in February.

Since then, the company has reduced the number of company executives on its board, announced the stock repurchase and doubled its quarterly dividend. The company also launched a search for a major partner to help it sell nebivolol, a hypertension drug Mylan originally intended to sell on its own by acquiring King.

"There is no question that shareholder activism has worked well to enhance shareholder value at Mylan," Icahn said.

However, based on yesterday's closing price, Mylan shares are trading for about 1 percent less than they were before the King acquisition was announced July 26.

Mylan, which borrowed $500 million to help pay for the share repurchase, said the auction was not an attempt to mollify Icahn. But many observers believe that was the intent.

"Given Icahn's history, Coury had to figure he would tender his stock," said Charlie Smith, chief investment officer of Fort Pitt Capital in Green Tree.

Much of Icahn's rhetoric was aimed at Coury, who came under fire for the King proposal as well as disappointing results. Profits have fallen short of year-ago results for five consecutive quarters, a streak that's likely to be extended when Mylan announces its fiscal first-quarter earnings today.

"They're probably breathing a little easier, but they're a little wiser, I think," Melvin said of Mylan management.

Icahn said it would be difficult to win a proxy fight with Mylan shares priced at current levels. It will be even harder to proceed once he sells the majority of his shares, leaving him with less than a 1 percent stake in the company.

Mylan plans to repurchase another $250 million of its shares on the open market once the auction is completed. That will give Icahn a chance to further reduce his holdings.

Icahn said his decision to offer his own slate of directors when Mylan shareholders meet in October will depend on Mylan's stock price in the next several weeks, the actions of management and the views of large Mylan shareholders.

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MYL, KMG, KG,

Source: Pittsburgh Post-Gazette

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