Activist shareholder Carl Icahn has all but declared war on the board of Amylin Pharmaceuticals, urging it to pursue a buyer for the company and positioning himself to possibly launch a proxy fight to replace its directors. Icahn, Amylin’s third-largest shareholder with 14.4 million shares, or an 8.9% stake in the drug developer, said the board was “dysfunctional and is not operating in a manner that enhances shareholder value” in an open letter to shareholders.
In that letter, Icahn chided the board for not commenting on press reports last week that Amylin had rejected a $3.5 billion, $22-per-share takeover offer from Bristol-Myers Squibb (BMS). Icahn also criticized the Amylin board for failing to disclose the BMS offer while agreeing to a public offering last month of 10% of company shares at $15.62 per share, with options for the company’s top executives that could be exercised at $16.02 per share.
“It’s hard to understand how it fits under the words 'fiduciary obligation' that you have a reported $22 bid and give yourselves options at $16 and didn’t tell anybody about the reported $22 bid,” Icahn said in an interview with Bloomberg. “This company could fetch more than $22. The company should go through a process and try to get the price they can for shareholders and let the shareholders decide.”
In the letter, Icahn wrote: "These actions make absolutely no sense to me in light of a Bristol-Myers bid and have served to substantially dilute shareholders who owned the stock when these actions were taken. The revelation of the Bristol-Myers bid as well as your failure to disclose it and your subsequent stock issuances at prices well below the reported $22 offer price, which occurred after that deadline, constitutes a dramatic change in circumstances requiring the board to permit shareholders another opportunity to nominate directors.”
Icahn noted that he sent the company a formal request seeking information about the public offering and other events after the BMS offer under Section 220 of the Delaware General Corporation Law. Section 220 allows stockholders in Delaware-registered corporations to, under certain conditions, request that a corporation make available certain books and records for a "proper purpose."
"I and many industry analysts believe that the board of directors should pursue a sale of the company now," Icahn wrote in his letter to Amylin's board. "I believe there are more than a few potential acquirers for the company that could achieve significant synergies from an acquisition."
Also in the letter, Icahn asked Amylin to extend by 10 days its deadline for nominating new directors to the company’s board, demanding an answer to his letter by 5 p.m. EDT Thursday. Absent such an answer, he added that he would "have no choice but to seek in court an extension of the nomination deadline as well as other avenues of redress."
While a proxy contest right now would be a costly distraction, Icahn acknowledged to Reuters, "I would not shy away from that possibility if I felt that the board was not pursuing seriously the opportunity to sell the company."
Amylin makes diabetes drugs Byetta, a twice-daily injectable form of exenatide now on the market, and Bydureon, a once-a-week injectable form of Byetta, approved by FDA for type 2 diabetes on January 27 and launched to market in February.
Amylin spokeswoman Alice Izzo, in comments e-mailed to Bloomberg, replied: “Amylin’s board of directors is fully aware of its fiduciary duties and is committed to always acting in the best interests of all stockholders. The board continually considers all options available and is relentlessly focused on creating the greatest value for our stockholders.”
The BMS offer boosted Amylin stock, which zoomed 54% or $8.38 per share to $23.77 at the close of trading March 28, after Bloomberg first reported the takeover offer. Amylin shares have continued to climb, closing at $24.70 on Tuesday, then sliding to $23.88 as of 10 a.m. Wednesday.
That’s still about one-third higher than the high of $18.35 recorded for the first quarter through February 16 and double the $12.23 high in share price for the fourth quarter of 2011. As of February 16, Icahn was one of “approximately 549 shareholders of record” of Amylin common stock, the company said in its 10-K annual filing with the SEC. Executive officers, directors, and holders of approximately 5% or more of its outstanding common stock owned or controlled approximately 39% of the company’s outstanding common stock.
Amylin has sought to block hostile takeovers through provisions that lets the board fill vacancies created by any board expansion and issue without stockholder approval up to 5.5 million shares of preferred stock on terms set by the board; that limits the ability of common stock holders to call special meetings of stockholders; and that requires all stockholder actions occur at stockholder meetings.
To read the story from Bloomberg, click here.
To read the story from Reuters, click here.