Elan shareholders risk losing $2 billion by listening to the company’s board and rejecting Royalty Pharma’s takeover bid, according to market analysts.
While Royalty Pharma boosted its unsolicited offer to as much as $15.50 a share this month, at least five analysts covering Dublin-based Elan see the stock falling if that bid disappears, according to data compiled by Bloomberg yesterday. UBS estimates a 28 per cent plunge to $9.70, which would wipe out $2 billion of market value.
Royalty Pharma, which has bid $6.7 billion for the Irish biotech business, has said its bid will be withdrawn if shareholders support four resolutions being proposed by the company at an extraordinary general meeting on Monday.
Former director
Yesterday, former Elan director Jack Schuler attacked the management of Elan over the transactions the resolutions are designed to approve saying that they were "value destructive".
In a letter published in the Financial Times, he said he was "shocked" at the actions Elan's directors had undertaken in connection with the Royalty Pharma bid.
The transactions are at the centre of a dispute between Elan and Royalty Pharma, which has made a $6.7 billion bid for the business. It will be forced to withdraw that offer if shareholders approve the resolutions. The deals in question include the $1 billion acquisition of rights to royalties in drugs being developed by Theravance Therapeutics; the acquisition of Austrian specialty pharma group AOP Orphan; the spin-off of the company's last remaining drug development programme ELND-005; and a $200 million share buyback.
'Value destructive'
"The series of acquisition transactions that Elan has undertaken in the last month appear to be an attempt to frustrate Royalty Pharma from being able to succeed with their offer," Mr Schuler wrote. "The transactions are clearly value destructive and not in the best interests of Elan or its shareholders." Mr Schuler wrote that the transactions had been "done in haste" and questioned whether there had been "much board analysis or consideration".
Mr Schuler led a high-profile campaign against Elan’s management and board in 2009 before being appointed to the company as a director. He left just over a year later.
Elan yesterday characterised Mr Schuler as a “disgruntled director who left the board”.
Elan has consistently stated that Royalty is undervaluing the company in its offer. Royalty, which has twice raised its initial offer – mostly recent to $13 a share, plus a $2.50 contingent value right depending on sales of Elan's former multiple sclerosis blockbuster drug Tysabri, hitting certain ambitious targets – says it is paying a considerable premium to Elan's own value of itself when it sold control of Tysabri to its US partner Biogen four months ago. – Additional reporting, Bloomberg
