By Jessica Hodgson
LONDON--Royalty Pharma AG, the New York-based pharmaceutical
investor bidding around $6.4 billion in cash for drugmaker Elan
Corp. (ELN) Thursday said it was lowering the threshold for
shareholder acceptance for its offer to 50% plus one share, from an
earlier 90%.
Royalty's move is the latest twist in a months-long struggle
over Dublin-based Elan after Royalty Pharma, which invests in
royalty streams from drugs, made its initial approach in
February.
Lowering the acceptance threshold for investors during bid
situations is a tactic which tends to encourage more shorter-term
shareholders such as hedge funds who are trading the stock based on
takeover activity, often buying from the longer-term strategic
holders who have the heft to block the approach.
"The Elan directors have failed to maintain an appropriate
balance between supporting management's acquisition plan and their
fiduciary responsibilities to Elan shareholders in respect of
Royalty Pharma's offer," Pablo Legorreta, Chief Executive Officer
of Royalty Pharma, said in a statement.
"We believe that the increased offer provides Elan Shareholders
an attractive financial alternative that will allow them to realize
value for their Elan stock in cash immediately."
Elan declined to comment Thursday, but had earlier "strongly
advised" recommended its investors take no action in relation to
the $12.50 per share offer.
Elan, which has its primary listing in the U.S., earlier this
year sold its only revenue-producing drug. It's in the process of
reshaping itself, buying and selling companies as it shifts away
from a historical focus on neurological disorders and into areas
such as orphan drugs and heart and respiratory medicine.
Royalty Pharma on Monday raised its multibillion-dollar takeover
bid for Elan to $12.50 a share in cash, the same day Elan announced
a string of transactions designed to rebuild its business and
secure its independence.
Monday's revised offer values Elan at $6.4 billion, less than
the $7.3 billion that the company would have been valued at under
Royalty's earlier bid of $12 per share. The lower valuation,
despite the raised per-share offer, reflects a reduced number of
shares in issue as a result of a $1 billion share buyback which was
taking place at the same time as Royalty's bid approach.
Days before Monday's raised approach, Elan announced a $1
billion deal with Theravance Inc. (THRX), giving it a share of the
royalty stream from four respiratory drug programs. Last week it
said, subject to shareholder approval, it would buy AOP Orphan, a
closely-held Austrian company focused on rare diseases in a deal
valued at EUR263.5 million and Newbridge Pharmaceuticals, a
Dubai-based startup for $40 million and would spin off a drug in
development for Alzheimer's disease into a new company with an
undisclosed investor. It also outlined plns to buy back an
additional $200 million in shares and issue $800 million of
debt.
Elan has faced uncertainty over its future since it sold its
half of blockbuster multiple sclerosis drug Tysabri in February to
development partner Biogen Idec Inc. (BIIB) for $3.25 billion.
Tysabri was Elan's only revenue-producing drug.
The company has retained a royalty stream from sales of Tysabri,
but the deal raised questions about its strategic direction and
future, prompting the approaches from Royalty, which Elan
shareholders so far have rebuffed.
Royalty said Monday Elan "dramatically overpaid" in the
Theravance deal.
Royalty, founded in 1996, owns royalty interests in products
such as Gilead Sciences Inc.'s (GILD) HIV drugs Emtriva, Truvada
and Atripla and Abbott Laboratories' (ABT) arthritis drug
Humira.
Write to Jessica Hodgson at jessica.hodgson@dowjones.com
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