Allergan Has No Reason to Believe Icahn Will Pursue Activist Role

Carl Icahn disclosed that he acquired a huge stake in Allergan Plc (NYSE:AGN), and expressed his support to Brent Saunders, the CEO of the pharmaceutical company, in a statement on Tuesday.

Icahn said, “We have recently acquired a large position in Allergan and are very supportive of CEO Brent Saunders.” The activist investor added that his firm was instruments in bringing Saunders to become the new CEO of Forest Laboratories in 2013.  Icahn noted that Saunders worked constructively and cooperatively with him to help increase the value of shareholders at the time.

Actavis acquired Forest Laboratories in 2014. Actavis subsequently merged with Allergan, which resulted “massive gains for shareholders.”

“While we at that time disposed of our position in Forest, we still have always maintained great respect for Brent. We have every confidence in Brent’s ability to enhance value for all Allergan shareholders,” said Icahn.

On the other hand, Allergan does not perceive Icahn as a threat and believes that he will not pursue an activist role.

Allergan said it “has no reason to believe that this investment was made for purposes of influencing the actions of management or control of the company.”

Take note that Icahn made similar statements when he acquired large positions in other companies like Apple, but he pushed for changes. Icahn wrote to Apple CEO Tim Cook that he “could not be more supportive of you, the existing management team, the culture at Apple and the innovative spirit it engenders,” after he disclosed his position in the company in August 2013.

Icahn demanded Cook to return more of the company’s increasing cash pile to investors. Apple boosted its dividend and stock buybacks, which fueled a 38% rise in the stock price of the iPhone maker. In April, Icahn said he sold his entire stake in the tech giant.

Allergan perceived to be in the cross-roads

A report from Bloomberg noted that Saunders helped arrange the plan for Allergan to be acquired by Pfizer for $160 billion. The deal fell apart after the United States government proposed tax rules that would reduce the benefits from the acquisition.

Market observers suggested that Allergan is in the crossroad after the collapse of the Pfizer transaction. It is now in the process of selling its generics business to Teva Pharmaceutical (NYSE:TEVA) for approximately $40 billion.

Last week, Saunders reiterated that the transaction is expected to close in the first half of this year. Allergan plans to use proceeds from the deal to repay some of its debt, repurchase shares, and to pursue more mergers and acquisitions.

Saunders also stated that he is comfortable with Allegan’s organic growth potential and expressed that he is open to transformational ideas and do tuck-in deals to boost the company’s existing product lines.