Royalty — a New York-based private investment management firm — said it had contacted Elan via chairman Bob Ingram last Monday, Feb 18, and followed it up with a meeting two days later where it put forward its $11 per share proposal to buy Elan.
The US company said it remained committed to “working towards a recommended transaction”, despite noting that it had not received a formal response, and had been unsuccessful in efforts to engage with Elan since making the proposal.
The company added that it had been surprised at not being mentioned by Elan last week, when the latter announced plans for the $3.25bn it is set to receive for the disposal of its 50% stake in multiple sclerosis treatment Tysabri.
As well as investing in new assets and paying down debt, Elan has proposed to return $1bn to shareholders via a share buyback programme.
Elan yesterday said the timing of Royalty’s announcement was “highly opportunistic”, coming before Elan’s shareholders have had the opportunity “to assess and realise the full benefit of the Tysabri transaction and the partial unlocking of its value”.
It added that its plan for diversifying its assets and buying back shares offers “a compelling investment thesis for our current shareholders” and said it expects the sale of the Tysabri stake, to developmental partner Biogen Idec, to close “in the near future”.
Elan said it had acknowledged Royalty’s announcement, adding that “any credible proposal which may be made by Royalty Pharma, or any other party, will of course be considered” alongside “the transactions and unique investment thesis” announced last week.
Royalty Pharma said the risks and lack of earnings’ visibility associated with Elan’s plans are “substantial”.
The US company added that Elan shareholders have “a simple and clear choice”: To remain an investor in a company “whose material assets [following the completion of the Tysabri sale] will consist of cash and Tysabri royalty payments” or to sell their stock for a cash amount, Royalty believes “reflects the full value of Elan today”.
After rising by 9% in early trading yesterday, Elan shares closed in Dublin at €8.52, 6.9% up on Friday’s closing price.