Look Behind Icahn's Battle for Control of Genzyme -- It's the ImClone War, Part Deux

Don't be distracted in Carl Icahn's fight for control of Genzyme (GENZ). This is not, as the billionaire activist shareholder has told investors, an "attempt to fix what is broken" in Genzyme's management. Rather, it's ImClone Part 2.

We know this because the word "ImClone" is mentioned nine -- 9! -- times in Icahn's proxy solicitation to Genzyme shareholders, in which he asks them to vote for his management slate. ImClone, you'll recall, is the cancer-drug biotech Icahn took over and then sold two years ago.

The back story: Genzyme has had a disastrous year. It polluted its own drugs with bits of rubber and metal; one of its labs was infected with a virus and three of its new drug candidates were either rejected by the FDA or dropped. Meanwhile, CEO Henri Termeer's compensation agreement has made him a gazillionaire. The founder of the company has called for his resignation.

Enter Icahn, with soothing words for investors who have seen GENZ plummet from above $80 to $48-and-change. Icahn's mere interest in the company has bumped the price back above $56. But Icahn's rationale for getting his men on the board (and they are all men) is disingenuous. Here's his come-on to stockholders:

Given that Genzyme's management has performed so poorly in the past, our first task will be to attempt to help fix what is broken. You need only read the financial press to know that Genzyme is ailing and its shareholders will benefit if strong medicine is applied. We have heard from a number of shareholders that they have very little faith in the current Board and believe that there should be a major shake-up in its composition.

The key term here is "our first task." OK, so after Icahn takes four seats out of nine, what's the second task? He doesn't say. At least not explicitly. Unless you read the rest of the solicitation, which gives readers the impression that Genzyme has something to do with ImClone.

In addition to mentioning the cancer-drug company numerous times, Icahn also wants to install one of ImClone's board members on the Genzyme board. The implicit message is clear: I want to do to Genzyme what I did to ImClone.

In 2008, after Icahn had gained a majority of ImClone's shares, he engineered the sale of the company and its Erbitux blockbuster to Eli Lilly (LLY) for $62 a share, 33 percent more than what ImClone was trading at before bidding began (Bristol-Myers Squibb (BMS) briefly showed interest, also).

So, while Termeer may believe -- according to his statement -- that this battle has something to do with the quality of his management and whether Genzyme is "regaining its momentum," Icahn is posing a rather more blunt question to stockholder: Would you like more money?

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