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$ELN’s Board Rejects Royalty Bid Citing it Was Grossly Undervalued

“DUBLIN (Reuters) – Irish drugmaker Elan rejected a reduced $11.25 per share bid from Royalty Pharma , putting the ball back in the U.S. investment company’s court in an increasingly convoluted takeover saga.

Royalty made its initial approach in February, attracted by the promise of lucrative revenues from Elan’s multiple sclerosis drug Tysabri. But Elan has fought to maintain its independence through a series of maneuvers designed to frustrate the bid, which is contingent on 90 percent acceptances.

Royalty last week lowered its bid for Elan to $11.25 a share from an earlier $12 offer, pricing in the result of a $1 billion share buyback by Elan. The $12 per share offer had valued Elan at $7.3 billion and had been sweetened from an initial proposal.

Buoyed by the outcome of the buyback, Elan, which claimed last month that most of its shareholders did not view Royalty’s original proposal as worth consideration, strongly advised shareholders to take no action in relation to the bid.

“The offer from Royalty Pharma grossly undervalues Elan’s current business platform and our future prospects. As a result the board unanimously and without reservation rejected the offer,” Elan Chairman Robert Ingram said in a statement on Monday.

As part of the share buyback, U.S. healthcare firm Johnson & Johnson cut its stake in Elan to 4.9 percent from 18 percent, accounting for more than 90 percent of shares repurchased.

Analysts were divided as to whether the buyback’s outcome signaled confidence in Elan’s plans to reinvent itself through a series of acquisitions, or speculation that Royalty would eventually return with a higher bid.

But after 73 percent of shares excluding Johnson & Johnson’s were not tendered at any price in the pre-announced $11.25 to $13.00 range, Royalty may have to come back with a better offer.


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