Icahn Stands to Make $1.7 Billion Profit on Forest Labs Bet

Feb 18, 2014 5:12 pm ET

(Updates with Icahn investment return in fifth paragraph.)

Feb. 18 (Bloomberg) -- Carl Icahn, the shareholder activist who waged two proxy fights for board seats at Forest Laboratories Inc., stands to earn almost $1.7 billion in gross profits on his 11 percent stake in the drug company.

Icahn paid a total of about $1.06 billion for his holdings in Forest, consisting of 30.66 million common shares, according to regulatory filings. That works out to about $34.66 a share.

Forest, based in New York, said today it agreed to be acquired by Actavis Plc for about $25 billion, or $89.48 a share in cash and stock. Icahn, who gained seats on the board of Forest in 2012 and 2013, described the transaction as “one of the best pharma mergers in the last decade.”

This “is a huge win for all shareholders of Forest Labs and yet another validation of the activist investment philosophy” that Icahn uses, the billionaire said in a statement today.

Icahn’s investment operations had a 26.3 percent gross return for the first nine months of 2013, according to a quarterly report filed in November by New York-based Icahn Enterprises LP. That compares with a 19.8 percent return for the Standard & Poor’s 500 Index, including reinvested dividends.

Activist Campaign

Icahn initially disclosed a stake in Forest at the end of the third quarter of 2009, reporting that his firm held 1 million shares. By June 2011, when Icahn began waging an activist campaign, his firm had acquired the equivalent of 19.9 million shares, or a 7 percent stake.

Forest has been seeking new products since the loss of patent protection on its former top-seller, the antidepressant Lexapro. The shares rose 28 percent to $91.04 at 4:15 p.m. in New York. Icahn didn’t respond to requests for additional comment.

Wellington Management Co. was ranked as Forest’s largest outside shareholder at the end of last year, according to regulatory data compiled by Bloomberg. The Boston-based money manager controlled more than 37 million shares, or 13.75 percent of the company.

In reporting its Forest stake, Wellington included shares owned by a healthcare fund that it manages on behalf of the Vanguard Group Inc. in Valley Forge, Pennsylvania. The Vanguard Health Care Fund owned 26.7 million Forest shares at the end of last year, data compiled by Bloomberg shows.

--Editors: Pierre Paulden, Sree Vidya Bhaktavatsalam