Icahn: Activist investing works, and Forest deal shows it

Carl Icahn

After two proxy battles with Forest Labs ($FRX) and a settlement that warded off a third, longtime rebel investor Carl Icahn finally got his way Tuesday when Actavis ($ACT) announced its $25 billion buyout of the New York City-based company. And while Forest and Actavis are hailing the deal as a win for their companies, Icahn is touting it as a victory for his activist investment strategy.

Icahn has plenty to be happy about now that someone has finally swooped Forest up. Bloomberg lists him as the company's second-largest shareholder with 11.3%, and he netted a profit of about $1.7 billion on the news, Reuters reports. But for Icahn, it's not just about the money; it's a matter of principle.

"This is a huge win for ALL shareholders of Forest Labs and yet another validation of the activist investment philosophy in general," he said in a statement on his website. "…Our investment in Forest is a textbook example of the tremendous shareholder value creation that can be achieved when boards and managements work hand in hand with activist investors, as opposed to wasting corporate assets in unnecessary fights."

That value creation includes a return of 209% for shareholders since November 2009, when he first disclosed his stake in the company. It's an outcome he's been itching for for years. Icahn insisted that Forest needed to massively expand or sell itself to realize its full potential. And with former management not on his side, it's a goal he only reached through dogged pursuit of his investment philosophy.

Last September, Icahn's efforts finally generated a change at the top: The board replaced the retiring Howard Solomon, Forest's CEO of 35+ years, with Brent Saunders, a former helmsman at Bausch & Lomb. From there, things moved seamlessly in Icahn's direction. Just 6 months into the job, Saunders met up with Actavis CEO Paul Bisaro at the J. P. Morgan Healthcare Conference "just to say hi," Bisaro told Bloomberg in a phone interview. 5 weeks later the deal was done.

"We didn't run a full sales process," Saunders told Bloomberg. "This was a situation that came on very quickly as Paul and I got to know each other."

While Icahn may be the most infamous proxy brawler, he's not the only one to spur significant change in the industry as of late. This summer, his protégé Alex Denner jumped into a bitter proxy contest between Vivus ($VVUS) and shareholder First Manhattan Co., helping oust then-CEO Leland Wilson and half the company's board in an 11th-hour settlement before shareholders were set to vote. And more recently, rebel investor Benny Landa rallied the troops for change at Teva ($TEVA), which has since agreed to slim down its board and refill some of its seats with experienced industry veterans.

- read Icahn's release
- get more from Reuters
- see Bloomberg's take

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