Activist Billionaire Carl Icahn Investing In Old Friends

Last week, investor Carl Icahn reportedly acquired a large stake in Botox creator, Allergan PLC. In a personal statement published on his website, Icahn expressed his support of Allergan CEO, Brent Saunders, and confidence in his ability to enhance value for all shareholders. Mr. Icahn did not disclose the size of his position.

Icahn has a long history of taking on management or urging changes in organizations, but this year, his fund has suffered huge losses and he has been focused on selling stakes, including a significant one in Apple Inc. that helped return cash to shareholders. He is cautious of an incoming financial crisis and plans to tone down his normal activism.

Allergan does not expect Icahn to use his investment to influence management or the direction of the company. Allergan's stock slid 25% this year, after the collapse of a proposed $150 billion sale to Pfizer Inc, which was designed to cut taxes by moving Pfizer headquarters overseas. Just last year, Icahn pledged $150 million advocating tax reform to prevent similar deals.

Mr. Icahn and Saunders were already acquainted in 2011, when Icahn fought to remove former chairman and CEO of Forest Laboratories Inc, Howard Solomon. Forest brought in its own independent directors, including Saunders. Icahn later won his own seat as an independent director, but it wasn't until 2013 that Solomon stepped down. With Icahn's assistance, Saunders was chosen as Solomon's replacement.

Five months later, in February 2014, Saunders sold Forest to Actavis for $25 billion. Icahn made $2 billion from the deal. By the end of the year, Actavis acquired and rebranded itself as Allergan, at a cost of about $70 billion. It is now estimated to have a market value of more than $90 billion.

Allergan is set to sell its generic drug business to Teva Pharmaceutical Industries Ltd. for more than $40 billion. The company has announced it would buy back as much as $10 billion in stock. Activists like Icahn tend to be wary of acquisitions. He has previously warned Saunders to keep his spending in check and avoid risky bets. Saunders has said Icahn has been a "catalyst" for change. 

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