Royalty Pharma ups bid for Irish drug firm to $8bn
Dublin, June 8, 2013
US pharmaceutical investor Royalty Pharma on Friday raised its hostile bid for Irish drug firm Elan to a potential $8 billion, the third increase in five months.
A majority of Elan shareholders have held off tendering their shares in hopes of a bigger pay day.
Royalty is now offering $13 cash per share, up from $12.50 previously, and added a contingent value right (CVR) clause that could mean an additional $2.50 per share if Elan's blockbuster multiple sclerosis drug Tysabri hits certain sales milestones.
Institutional investors collectively holding 5 to 10 percent of Elan told Reuters they would approve the new Royalty Pharma bid, but said they do not think this was the suitor's final offer.
"The best thing I like about this offer is that it doesn't say 'best and final,'" said one shareholder.
Elan's board said on Friday it would assess Royalty Pharma's offer "in line with its obligations under Irish takeover law," and advised shareholders to take no action on the bid in the meantime.
Royalty Pharma declined to comment on whether it was prepared to increase its bid again.
Elan institutional shareholders interviewed by Reuters, who asked to remain anonymous because they are not permitted to speak to the media, said they would approve the Royalty offer.
They said the one thing that could put Royalty's efforts in jeopardy would be if Elan were to find a rival bidder.
Ireland-based companies like Elan are often attractive takeover targets for companies based in the US because they can offer the acquirer a lower tax rate. The corporate tax rate in Ireland is 12.5 per cent, compared with 35 per cent in the United States.
Royalty Pharma is already based in Ireland and thus would not gain any special tax benefit from buying Elan.
If Elan found another potential buyer that would gain tax benefits from acquiring Elan, that buyer might be willing to top Royalty Pharma's bid, the shareholders said.
But finding a buyer who would outbid Royalty might be challenging, according to industry bankers. Elan has no research facilities of its own and is essentially a cash stream, collecting royalties on drugs owned and sold by others.
On February 26, Royalty Pharma made its first bid for Elan - $11 per share - saying Elan's management did not have the experience to be a standalone pharmaceutical company and make acquisitions on its own.
After pushback from Elan, Royalty Pharma sweetened its bid in April to $12 a share, or $7.3 billion.
In May, Elan went on a buying spree, striking three deals: $1 billion for 21 percent of the royalties of US pharmaceutical company Theravance ; $40 million for a 48 percent stake in Dubai-based sales and marketing company Newbridge Pharmaceuticals; and $337 million for Austrian rare drug specialist AOP Orphan.
Not to be deterred, Royalty Pharma on May 20 raised its takeover bid to $12.50 per share but threatened to withdraw the offer if Elan shareholders approved any of its planned acquisitions.
Elan shareholders are scheduled to vote on the deals, a share buyback and a drug spinoff on June 17.-Reuters