Royalty Pharma offers to buy Elan for US$6.5bn

Elan says proposal is ‘highly opportunistic’

The timing of the RP Management (Royalty Pharma) proposal to purchase Irish biopharmaceutical firm Elan Corporation for approximately US$6.5bn or $11 per share is viewed as ‘highly opportunistic’ by Elan’s management.

The New York-based privately held investment management company claims its proposal would prevent Dublin-based Elan and its shareholders from taking ‘substantial risks’ in reinvesting the $3.5bn that it will receive from selling its interests in Tysabri to Biogen Idec.

Elan recently announced that it would reinvest some of the proceeds by ‘acquiring different types of assets and refinancing its outstanding debt’.

The drug manufacturer also plans to implement a $1bn repurchase programme to return the unlocked value of Tysabri to shareholders.

Elan expects the Tysbari deal to close ‘in the near future’.

Royalty Pharma says it has not received a formal response to its proposal yet is committed to working towards a recommended transaction.

Elan says the announcement does not give its shareholders time to assess the Tysabri deal and realise its full benefits. The company also notes the ‘heavily conditional nature’ of Royalty Pharma’s indication of interest.

‘Any credible proposal which may be made by Royalty Pharma or any other party will of course be considered by the company alongside the strategic transactions and unique investment thesis referred to above,’ Elan says.

The announcement does not give its shareholders time to assess the Tysabri deal and realise its full benefits

Royalty Pharma says the ‘risks and lack of earnings visibility associated with Elan’s acquisition and in-licensing strategy are substantial’ and believes that a successful acquisition strategy would require Elan to build an operating infrastructure and sales force to allow it to realise synergies from acquisitions.

Royalty Pharma also said: ‘While Elan’s management has demonstrated its ability to execute several significant disposals (including the sale of some or all of bapineuzumab, Elan Drug Technologies and Tysabri), the current senior management team of Elan has not made any significant acquisitions or in-licensed any significant late stage products for Elan and thus does not have a track record of generating attractive returns from acquisitions or in-licensed products for Elan.’

The company claims its proposal offers Elan shareholders ‘an attractive financial alternative that will allow them to realise value for their Elan Stock in cash immediately and eliminate the execution risk associated with identifying, acquiring, integrating and growing attractive assets in the context of a highly competitive strategic landscape’.

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