Irish biotechnology firm Elan Corp. plc (ELN) announced Friday that its board has authorized the commencement of a formal sale process, citing the expressions of interest received to date. The company noted that privately-held investment company Royalty Pharma will be invited to participate in the formal sale process. Following the announcement, Elan's shares are trading higher by 8 percent in early dealings.
Meanwhile, Elan urged shareholders not to tender their shares into the current Royalty Pharma hostile offer in the hope that it might receive a higher offer.
Ireland-based Elan is currently the target of a hostile takeover bid by Royalty Pharma, which had announced in February the initial proposal to acquire Elan for $11 per share for every Elan share and every Elan ADS, through its subsidiary Echo Pharma Acquisition Ltd., that was revised several times.
Elan said, "the Board and management are aligned in maximizing the full value potential of the business on behalf of Elan's shareholders. We will update the market as appropriate."
The initial bid by Royalty Pharma was made after Elan agreed to sell its stake in multiple sclerosis drug Tysabri to biotechnology company Biogen Idec Inc. (BIIB) for $3.25 billion in upfront payment. In May, Elan announced a $1 billion royalty deal with pharmaceutical company Theravance Inc. (THRX).
Further, Elan agreed to buy Austrian rare drug specialist AOP Orphan for 263.5 million euros, and a 48 percent stake in Dubai-based NewBridge Pharmaceuticals for $40 million. Elan also announced a buyback of $200 million of its common shares, and the issuance of $800 million of debt.
While all these events unfolded, Royalty Pharma sweetened its offer for Elan thrice. It announced an offer of $12 per share in mid-April, an offer of $12.50 per share on May 20, and an offer of $13 per share plus up to an additional $2.50 per share in contingent value rights or CVR of June 7.
Elan's Board of Directors has unanimously rejected all these offers from Royalty Pharma, deeming them as grossly inadequate.
For the sale, Citigroup, Davy Corporate Finance, Morgan Stanley and Ondra Partners are Elan's financial advisers, while A&L Goodbody and Cadwalader, Wickersham & Taft LLP are its legal advisers.
J.P. Morgan, together with its affiliate J.P. Morgan Cazenove, BofA Merrill Lynch, together with its affiliate Merrill Lynch International, Groton Partners and Investec are acting as financial advisers to Royalty Pharma.
In Friday's regular trading session, ELN is currently trading at $13.60, up $0.99 or 7.83% on a volume of 32.90 million shares. In the past 52-week period, the stock has been trading in a range of $9.37 to $14.80.
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