ImClone Systems Incorporated (NDAQ:IMCL) has been embroiled in a battle with activist investor Carl Ichan for some time now, and things just keep heating up. The drama reached a new high today after the company released an interesting bit of information about Mr. Icahn:
"Mr. Icahn fails to tell you that only a few weeks ago he asked the Board to waive Section 203 of the Delaware General Corporation Law, which would have facilitated him buying more than 15% of the Company’s common stock without first making a tender offer to all stockholders. He fails to tell you that the directors he now seeks to remove refused to grant him this waiver.
Mr. Icahn also fails to tell you that when a proposed acquirer told the Company a few weeks ago that it would be prepared to make an offer to acquire the Company for $36 per share in stock if Mr. Icahn would support it, he refused.
Mr. Icahn says he wants the Board to find a permanent Chief Executive Officer, but fails to tell you that he, one of his employees and one of the directors he proposes remain on the Board already constitute three of the six members of the committee tasked to find the new Chief Executive Officer.
By a majority vote, your Board determined that, although control of the Board may be in the best interests of Mr. Icahn and his affiliates, it would not be in the best interests of all stockholders.
We urge you to reject this maneuver by Mr. Icahn, who owns less than 15% of the outstanding stock, to remove six members of your Board and take over effective control of your Company and its future. The directors Mr. Icahn seeks to remove have extensive experience and knowledge of the Company and the biotechnology industry—knowledge that would be lost if Mr. Icahn is successful. Your Board is committed to acting in your best interests and believes that a balanced Board is better positioned than one dominated by Mr. Icahn to maximize long-term value for all stockholders." (Read Entire Letter)
Carl Icahn responded nine hours later with a convincing message to shareholders:
"1. ImClone filed a statement today with the Securities and Exchange Commission intimating that it turned down a bid of $35.50 for the Company as a result of my opposing it. This is in contradiction to the Company's statement of August 10, 2006, indicating that it turned down the bid because it was inadequate. It should be noted that the bid was a conditional non-cash offer and made with the bidder's stock, which I believed was overpriced. Either the ImClone Board is now attempting to totally mislead you or they are admitting that they did not even have the strength of conviction to support a sale they believed in when an 11% stockholder was against it. Are they now saying that they wanted to sell the Company (whose stock price had peaked at $86 per share in July 2004) for $35.50 in a non-cash transaction? While I admit I was opposed to the bid, if the Board really wanted to sell the Company at $35.50, it should have done what any self-respecting board would have done. They should have accepted the bid and then tried to convince the stockholders that the transaction was in their best interest and not let an 11% stockholder stand in their way.
This whole episode points out that the Board is either unable to make decisions even if they believe them to be in the best interests of stockholders or is currently misstating the facts solely to entrench themselves and keep themselves from being removed.
2. I believe that ImClone is worth more than $36 a share if it is run by competent people, including competent high-level management supervised by a competent Board of Directors. I believe in its product and its pipeline, and I believe its other stockholders share that belief. On September 14, 2006, the Company's investment banker called and said that the same bidder was interested in making the same all-stock bid at $36 with the same conditions, if I would favor it. I felt then that I was being asked to comment on a non-bid but stated that if the all-stock bid were made, I still thought that the consideration was inadequate and would vote my shares against it. In fact, no one from the Company even contacted me to tell me that they changed their mind on the basis that the new suggested price was 50 cents higher, nor did anyone from ImClone urge me to support the $36 possible bid. Had the Board really favored a sale at $36, the Board could have pursued the matter and asked the bidder to make the bid. However, I must admit I am very glad they did not." (Read Entire Letter)
Some investors are convinced that the Board is attempting a last ditch effort to save their jobs, while others contend that Carl Icahn is simply a smooth talker with a vendetta against the company. But we won't have to wait too long to find out, as the consent cards are already en-route to shareholders.
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