Royalty Pharma scrambles to salvage vote on hostile Elan takeover

Scrambling to salvage its takeover attempt of Elan ($ELN), Royalty Pharma today sent up an alarm signal telling investors that a majority of shareholders appear to have endorsed a $267 million stock buyback proposal, which would scuttle its bid. But if a few big investors change their minds ahead of the Monday tally, Royalty added, the insurgents could still emerge victorious.

Royalty issued the warning after reviewing 70% of the returns. Shareholders are voting on four resolutions, but an OK on the stock buyback or a deal to spin out ELND005 into a new company would push the Irish Takeover Panel to declare that the takeover bid had lapsed. And the panel could prevent any further bids for a full year, as Elan CEO Kelly Martin continues his campaign to reinvest a $3.25 billion windfall from the sale of Tysabri rights in new assets.

Analysts tell Bloomberg that shareholders have plenty at stake in the next few days. Royalty's sweetened offer of up to $15.50 a share--$13 cash plus a $2.50 CVR--is propping up the stock. And despite Elan's contention that other potential bidders have expressed an interest in the company, the only viable offer is the one on the table. Take that away, they say, and Elan's shares will tumble beneath the $10 mark, eviscerating $2 billion in value.

"The acquisition is really supporting the stock price at this point," S&P's Steven Silver tells the business news wire. "While Elan's management continues to outright dismiss all of Royalty Pharma's offers, I would think that the raised offer should entice some Elan shareholders. It's a fair offer."

Not only would a defeat likely drive Royalty away on Monday, it would leave Martin triumphant after 10 tumultuous years at Elan. High wire drug failures have competed with critical reviews of the executives' choice of private jets as shareholder groups repeatedly dogged Kelly with accusations of mismanagement.

Elan CEO Kelly Martin

But he's survived every blow and keeps coming back with more. And even some of his harshest critics think he'll come out on top again, free to continue a series of blockbuster deals that have managed to only stir the boiling pot even more.

"It's more than amazing, but my guess on the outcome is Kelly Martin is still CEO after that meeting despite everything that has gone on," Ib Sonderby, a persistent foe of Martin's, tells Reuters.

- here's the release from Royalty
- read the story from Bloomberg
- see the Reuters story