Investors risk losing $2bn if they reject new bid for Elan
ELAN shareholders risk losing $2bn (€1.5bn) by listening to the company's board and rejecting Royalty Pharma's takeover bid.
While Royalty Pharma boosted its 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.
UBS estimates a 28pc plunge to $9.70, which would wipe out $2bn of market value.
Shareholders vote next week on whether to endorse the sale to Royalty Pharma or back Elan chief executive Kelly Martin's strategy of buying drug rights as an independent company.
Even after Elan said last week that other potential suitors had emerged, S&P Capital said Royalty Pharma is probably the only realistic option.
Leerink Swann said Elan shareholders should accept the Royalty Pharma transaction.
"The acquisition is really supporting the stock price at this point," Steven Silver, a New York-based equity analyst at S&P, said.
"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."
Royalty Pharma sweetened its bid on June 7 to $13 a share in cash, plus as much as $2.50 a share in additional payments if performance targets are met.
This was its fourth attempt to purchase Elan in less than four months, following an $11-a-share bid in February and $11.25 and $12.50 offers in May.
While investors viewed the starting bids as too low, the latest offer may finally be enough to close the deal, said Keith Moore, an event-driven strategist at MKM Partners in Stamford, Connecticut.
"Shareholders are most likely going to side with Royalty Pharma now. Ultimately, it was going to be hard for Elan to fight the battle."
Elan said earlier this month that Royalty Pharma's bid is too low because its interest in Tysabri and net cash should be valued at $15.50 to $20.80 a share. (Bloomberg)