Shareholders face ‘no reward’ if Elan bought

Elan has warned its shareholders that they could stand to receive little or no financial reward if US firm, Royalty Pharma succeeds in its attempt to buy the company.

In repeating its assertion that the Royalty bid isn’t in the best interests of its shareholders, Elan said yesterday its investors face “significant harm” if the US company succeeds in gaining ownership.

“If Royalty Pharma surpasses its 50% acceptance threshold but doesn’t achieve 90% acceptance, it may leave remaining shareholders in a publicly traded, illiquid minority ‘stub’ that will be run for the benefit of Royalty Pharma private investors — not Elan shareholders.

“In fact, Royalty Pharma will be free to discontinue the Tysabri dividend and it will likely not continue Elan management’s commitment to capital return and long-term shareholder value creation,” it said in a statement.

It added that Royalty is a private investment firm whose business model is “all about buying assets on the cheap and generating value for their private investors.

“The Royalty Pharma revised offer is no more than a calculated attempt to acquire Elan at a substantial discount at the expense of our shareholders.

“In reality, it seems that Royalty Pharma is unwilling to compensate Elan’s shareholders for Elan’s long-term cash flow,” the company added. The Irish bio-tech company’s shareholders are due to meet on Jun 17 to vote on a number of transactions and proposals recently set out by management.

If they accept the resolutions — which include Elan buying a number of assets, launching a debt offering and giving more money back to investors via an additional share buyback — Royalty is set to walk away.

The two companies have been trading barbs of late — Elan stating at its AGM in Dublin, last week, that Royalty’s offer of $12.50 per share “substantially undervalues” the company; and Royalty saying the Irish firm’s management isn’t positioning the firm for growth.

Also at that meeting, Elan said that it stands to make between $484m (€369m) and $611m in annual royalties from Tysabri, the multiple sclerosis drug it recently sold out of, by 2016; which will be shared directly with shareholders, via a 20% dividend.

Elan’s chairman Bob Ingram said last week that management is taking nothing for granted regarding the upcoming EGM, but has claimed to have received “very positive feedback” from investors. Royalty has claimed certain Elan investors have shown support for its push.

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