Royalty Increases Pressure on Elan with Superior Offer

Royalty Pharma have increased their bid to acquire Elan Corp, in a move that values the Irish drug maker to up to $7.30 billion.

After being asked by the Irish Takeover Panel to make a tangible offer by May 10th or abandon their plans to buy Elan, Royalty has made what they describe as a “firm, fully-financed offer.”

Previously Royalty had made what Elan called “an indicative proposal” of $11 per share, or around $6.50 billion, which was rejected by Elan for being “highly conditional.”

The value of Royalty’s most recent bid is staggered depending on the pricing of a $1 billion share buyback that Elan received stockholder support for last week.  The offer ranges between $11.25 and $12, depending on the level Elan shareholders tender their stock.

Elan revealed plans for the buyback following the sale of their stake in the multiple sclerosis blockbuster Tysabri to partner Biogen Idec for $3.25 billion, plus royalties.  The Dublin-based group’s chief executive, Kelly Martin, commented in February that the organisation has been vaulting assets around the world and establishing relationships that might lead to “constructive strategic transactions.”

Royalty chief executive, Pablo Legorreta, noted that “Elan today consists of cash and a royalty on Tysabri” and claimed that Royalty are better placed than the current leadership to manage such a business.  He added that “in order to obtain the full amount of our offer in cash in the shortest timeframe, Elan’s shareholders should encourage the board to engage immediately with Royalty.”

Elan has yet to give a definitive response, confirming that they will “promptly assess the Royalty announcement and will advise its shareholders accordingly.”

Elan’s Acquisition Plan

Royalty’s offers have threatened to sink Elan’s plan to reinvent themselves through a series of acquisitions, and reward shareholders with cash after selling their 50% interest in Tysabri to Biogen Idec.

The business, in which Johnson & Johnson hold an 18% stake, secured strong approval from shareholders last week for the $1 billion buyback priced at between $11.25 and $13 a share.

However, Elan has little track record in making acquisitions and Royalty has questioned the organisation’s ability to achieve such a plan.


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