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ICN Chief Panic Agrees to Restructuring Plan

Pharmaceuticals: Analysts applaud proposal, which would divide firm into three companies and reduce his role as chairman.


Milan Panic, who has ruled ICN Pharmaceuticals Inc. with an iron grip for years, bowed to shareholder pressure and agreed to a restructuring plan that would greatly reduce his role.

Panic, 70, has long resisted efforts to step aside despite a string of legal hassles and a probe by securities regulators into alleged insider trading that cast a cloud over the Costa Mesa drug maker.

But with a bitter proxy battle looming at ICN's upcoming annual meeting, Panic agreed late Thursday to divide ICN into three publicly traded companies, severing his ties to the new unit that has rights to ICN's most promising drug, hepatitis treatment Ribavirin.

Wall Street reacted enthusiastically Friday to the news, driving up the company's shares to a 52-week high of $41.75 during the trading session. The stock, which has increased nearly 59% in value this year, closed at $40.19, up $1.25 a share on the New York Stock Exchange.

Panic's control of ICN "was penalizing the company," said Sutro & Co. analystD. Larry Smith. "With him out of the picture, people will gradually come to look at this as a good specialty pharmaceutical company," he said. A better-managed ICN could fetch a stock price of $60 to $80 a share, he said.

Under the plan, ICN would be divided into three companies:

* Ribapharm, a Costa Mesa company, would hold the rights to Ribavirin and would oversee the company's research and development.

* ICN Americas would assume control of other ICN operations in the United States and Canada, Mexico, Puerto Rico and Latin America.

* ICN International would be based in Moscow and handle business overseas, mainly in Russia and Eastern Europe.

Panic, who once served as prime minister of Yugoslavia for eight months, would head the international company. He has strong political and business contacts throughout Europe and Russia and has been the prime force behind the company's foreign expansion.

Indeed, he recently traveled to Yugoslavia to try to wrest control of a ICN plant in Belgrade that was seized by the government of then-President Slobodan Milosevic.

Panic, who founded ICN in 1959, would also hold the title of nonexecutive chairman of the ICN Americas unit. But he would have no position at Ribapharm, considered the crown jewel of the ICN empire because of the revenue it would receive from Ribavirin royalties under a lucrative licensing arrangement with Schering-Plough Corp. Schering combines Ribavirin with another drug to treat hepatitis C.

ICN also said it would consider other options, including selling all or part of the company before the restructuring.

"If this goes through, Milan will have a simpler and, I think, happier life going forward," said Bill Nasgovitz, co-manager of dissident investors Heartland Advisors Inc., which holds about 4.7% of ICN's shares. "And so will shareholders."

In the first half of this year, royalties from Ribavirin rose 67% to $76.6 million, from $45.9 million a year earlier. During the same period, ICN earned $58.5 million on total sales of $383.8 million. Some analysts believe annual revenue from the drug could approach $500 million in three years.

Analysts applauded ICN's proposed breakup, saying they believe the company's parts are worth more than the whole. The Ribapharm unit alone could be worth as much as $4 billion, topping ICN's market capitalization of $3.2 billion, said Richard Stover at Arnhold & S. Bleichroeder investment firm in New York.

Analyst Tom DesChamps said Ribavirin provides ICN with a valuable asset and revenue stream that's being clouded by management issues. "The restructuring will allow investors to see the diamond in the rough," said DesChamps, of Mehta Partners in New York.

The split also would also distance two ICN units from a European division that has been on a roller-coaster ride because of economic and political instability in Russia and Eastern Europe. In 1998, for example, ICN recorded a fourth-quarter loss of $223 million after its Belgrade plant was seized.

Panic said Tuesday that Yugoslav courts will soon legally transfer the plant to ICN. In 1992, the facility generated sales of $326 million, about 68% of ICN's total revenue.

The ICN chairman has been under increasing pressure from dissident shareholders to restructure the company. His original move to appease critics--spinning off two units that would have been controlled by ICN--drew more criticism.

Late Thursday, the company announced the latest reorganization blueprint--hours after Special Situations Partners, the biggest dissident shareholder, said it had submitted a list of five nominees to the board.

ICN denied that the insurgent group had filed a rival slate.

Under the plan, ICN's current shareholders would receive stakes in each of the companies. ICN said it would seek to have shares in its international unit listed on theBudapest and London stock exchanges. The company would seek to have Ribapharm's stock listed on Nasdaq, while ICN Americas shares would trade on the NYSE.

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