Investment Group Offers Up Suggestions to Drug Maker ICN

A European investment group that holds a 7.1% stake in ICN Pharmaceuticals Inc. has proposed that the Costa Mesa drug maker split off its Eastern European operations into a separate publicly traded company, among other suggestions.

The proposals were discussed with Chairman Milan Panic and other senior ICN officials at a meeting last week in Basel, Switzerland, said Eric Knight, managing director of the group, Special Situations Partners Inc. Tito Tettamanti, a private investor and chairman of Special Situations’ parent, Sterling Investment Group, also participated in the meeting.

ICN is “a very healthy company with no fundamental problems,” but its shares are undervalued, Knight said. The market has given a “severe discount” to the company’s stock price, apparently because of political tensions in Eastern Europe and their effect on ICN’s operations in Yugoslavia and other parts of the region.

Special Situations says many major pharmaceutical companies would be interested in acquiring ICN’s European operations if they were split off into a separate entity, Knight said. During the meeting with ICN executives, Special Situations representatives also suggested ICN might increase its borrowings to finance a major acquisition, among other options.

“We went through an exhaustive list of possibilities for improving shareholder value, and ICN management was in agreement with virtually everything we talked about,” Knight said. Panic and Tettamanti, who are both 69, got on well together, he said.

“There was general consensus from both sides, on the need for strong remedial action to be taken in the near term to restore the company’s stock price,” according to a Securities and Exchange Commission filing, which disclosed the meeting. The filing also reported that Special Situations recently spent about $12.9 million to acquire 520,500 ICN shares at prices ranging from $24.28 to $25.67. The group made its initial investment in ICN in late September.

ICN shares fell 75 cents Tuesday, to $23.94, in New York Stock Exchange trading. The company’s shares are off 5.8% for the year.

An ICN spokesman confirmed the meeting but didn’t elaborate on what was discussed. “Meetings with major shareholders and listening to their ideas is standard practice,” he said.

Special Situations invests in small- to medium-size companies in a variety of industries and businesses, Knight said. Many of the group’s current investments are in the United Kingdom. “We don’t aim to sit on boards or become insiders,” and Special Situations “hasn’t had any contact with other ICN shareholders,” he said.

Tettamanti, a lawyer by training, made his fortune in property development and investment, mainly in Canada. He was an international general partner of Coniston Partners, a prominent investment group during the 1980s that made investments in such companies as Viacom and Gillette. More recently, he has held large investments in Swiss engineering companies, including Sulzer and Sauer, which are both traded on the Zurich Stock Exchange.