Forest Vote Today May Determine Company's Future, Alienate Icahn

The battle continues in activist-investor Carl Icahn’s fevered examination of Forest Laboratories (NYSE:FRX). Today’s proxy vote will be this year’s penultimate decision; shareholders will be placing their bets with either Icahn or Forest President Howard Solomon and existing board members. Beginning last year, Icahn questioned Forest’s management future. He alleges that the Solomon family – Howard’s son is an executive – has entrenched themselves at any costs to the company and shareholders. Icahn believes that Forest blundered repeatedly in the last few years, both intentionally and otherwise. The board mismanaged a letter from the FDA regarding Forest’s marketing practices, said Icahn, and he points to a “poison pill” included in a recent licensing agreement with Cypress Bioscience as evidence of a familial dynasty. Icahn includes an earnings guidance miss in his list of grievances as well. He hopes to replace existing Forest board members with four of his own choosing, which he says will improve leadership with some outside influence.

Today’s proxy vote will come down to a choice of sides. Should investors retain the existing 10-member board, analysts believe shares could swing up or down 2%. If Icahn can make sufficient appeal to voters, however, and get at least two of his candidates onto the Forest board, many believe the stock could see a 5% increase. Shares have been mostly flat since March, following the back-and-forth banter of the two oligarchs. A preliminary vote points to a single new board member, most likely Icahn’s nominee Pierre Legault, joining the embattled executives. Proxy advisers gave mixed input to voters and many have refrained from taking a firm stance one way or the other.