* Elan CEO's grand plan on the line at shareholder meeting
* Survived decade of boardroom battles, shareholder sniping
* Allies say low-key Martin underrated, transformed company
By Padraic Halpin and Jessica Toonkel
DUBLIN/NEW YORK, June 13 When Kelly Martin, a
former Merrill Lynch banker with no drug industry experience,
took over as CEO of Ireland's Elan in 2003, analysts
assumed his mandate was to clean up the troubled company and
But 10 years later, despite boardroom battles, drug failures
and headlines criticising his use of private jets, Martin is
still in charge.
That might change after Monday, when shareholders vote to
back his vision for Elan or open the door for U.S. firm Royalty
Pharma after a fractious takeover battle.
On offer for shareholders is Martin's plan to reinvest a
chunk of the $3.25 billion Elan received from former partner
Biogen Idec for its interest in multiple sclerosis (MS)
drug Tysabri, in a series of deals aimed at reshaping the
Or they can vote down the acquisitions, a $200 million share
buyback and drug spinoff, clearing the way for Royalty, which
had its third increased bid valued up to $15.50 per share firmly
rejected by Elan's board this week.
Its offer is contingent on shareholders rejecting all four
resolutions at the meeting.
A third option is that shareholders vote against Martin's
planned acquisitions, but back the other resolutions, allowing
the CEO to live to see another day.
"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," said Ib Sonderby, who spent years campaigning
against Martin and Elan's board and created a rallying point for
angry investors with his now-ceased website, www.saveelan.com.
Martin's allies - loyal colleagues past and present -
believe the low-key family man, who prefers sweaters to suits,
has never got the credit deserved for fixing the troubled
company and lifting its share price almost six-fold.
But his detractors - from embittered former board members to
former investors - are stunned that the 54-year-old one-time
investment banker, who often runs the $7 billion drug firm from
his home office in Connecticut, is still in charge.
"I am worried that just as he has sold a bunch of things too
cheap over the years, now he will just pay too much to buy
things," said Sonderby, who owned 2 million shares in Elan in
2010 including his personal holdings and those of companies on
whose boards he sat, but sold out this year.
The bitter takeover battle, involving injunctions, court
hearings and a war of words, is reminiscent of Sonderby's days
of campaigning against what he and other activists perceived to
be Elan's mismanagement and poor corporate governance.
Elan has always rebuffed Sonderby's charges.
The Danish investor's gripes came to a peak when Elan shares
tumbled to under $5 in 2010, from $35 two years before. Martin's
allies say you have to go back to his arrival seven years prior,
when the stock was as low as $2, to properly judge his tenure.
"Martin has been very shareholder-friendly when you look at
the stock," said a person familiar with Elan, who wished to
remain anonymous because he is friends with Martin. "And he did
clean it up, until he started buying things."
Martin declined to be interviewed for this story.
Once Ireland's biggest public company, Elan was reeling from
an accounting scandal and was under investigation by the U.S.
Securities & Exchange Commission (SEC) when Martin swapped 21
years on Wall Street for a first crack at the pharmaceutical
industry in 2003.
Elan's share price had sunk to $2 from over $60 in the space
of a year and some analysts feared it could go bankrupt.
"It was a very, very precarious situation, but Kelly and the
board had nerves of steel and one by one by one, he and his team
dealt with the challenges," said Michael Tory of Ondra Partners,
one of Martin's key external advisers over the past decade.
"Most people don't want to run apart from the pack, but
Kelly has no fear of doing that. He is relentless in his
dedication to creating value for shareholders and never takes
his eye off that goal."
That dedication sometimes means London-based Tory having his
Sunday mornings interrupted when Martin, out walking at 5 or 6
a.m. his time, phones his friend to discuss ways to take the
"He'll call me from his son's hockey game with an idea he
wants to test out," ex-Lehman Brothers executive Tory recalls.
Another long-time colleague, who wished to remain anonymous
because he was not permitted to speak to the media, said the CEO
is underrated because he "doesn't play the game", preferring to
spend his spare time with his wife and five children rather than
attend conference after conference.
Detractors and supporters agree that the laid-back exterior
should not fool anyone and that Martin is a fighter.
In a colourful 10 years, due to end last year before he
decided to postpone his retirement, Martin has proved he is no
pushover, something former dissident directors Jack Schuler and
Vaughn Bryson saw first hand.
Nominated to the board in June 2009 in a move that appeared
to be the beginning of the end for the Elan CEO, the pair quit
15 months later after their challenge to Elan's transparency and
governance ultimately failed.
In a letter published in the Financial Times on Wednesday
headlined "Elan's current actions have a ring of familiarity
about them", Schuler said he had no confidence Martin was acting
in shareholders' interests.
Elan rejected Schuler's remarks and noted in a statement
that its shares had almost trebled in value since it announced
Schuler had expressed his desire to resign from the board.
Among those who have filled Schuler's place, however, are
new chairman Bob Ingram, a former top executive at
GlaxoSmithKline, and one-time U.S. Food and Drug
Administration (FDA) commissioner Andrew von Eschbach, big
industry names who have effectively staked their reputation on
the turnaround expert.
They will soon know if they were right.
"If you look at this company, you need to be able to marry
world-class science with world-class business management,"
Martin told Reuters on the day he took charge in January, 2003.
"What I would hope to bring to the party fairly quickly is
an ability from a business point of view."