Investment firm Royalty Pharma on Monday announced a firm, all cash offer for Ireland-based biotechnology firm Elan Corp. Plc (ELN) valued at up to $12 per Elan share. The firm offer represents a 23 percent increase over the enterprise value of Royalty Pharma's initial proposal.
The company noted that the offer also represents a 39 percent premium over of the undisturbed Elan enterprise value.
It was in February that Royalty Pharma made an indicative proposal to acquire Elan for $11 per share. Elan's then enterprise value amounted $10.35 per share or $3.135 billion, while proposal enterprise value totaled $11 per share or $3.531 billion.
Royalty Pharma now said it is offering for each Elan share and ADS $12, if the strike price for Elan's previously announced Dutch Auction is $11.75 or $12.
The offer price will be $11.50 if the Dutch auction strike price is $11.50, and $11.25 if the Dutch auction strike price is $11.25. The company also said the price will be $11 per Elan Share if the Dutch auction strike price is equal to or greater than $12.25 and less than or equal to $13.00, or upon the occurrence of certain other events.
Royalty Pharma said the offer price will be paid in cash if Elan confirms its net cash position on the given terms. However, if Elan fails to do so, the initial cash component will be $1 less and holders of Elan Shares will be issued a right to receive up to $1 in cash based on Elan's net cash position.
Commenting on the offer, Royalty Pharma Founder and Chief Executive Officer Pablo Legorreta said, "Elan today consists of cash and a royalty on Tysabri. … Based on our analysis of Elan's Tysabri royalty and the implied valuation of Elan's economics in Tysabri reflected in Elan's recent transaction with Biogen, we believe that our offer represents a full and fair value for Elan."
In early February, 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. Under the deal terms, Elan agreed to move from the 50:50 business collaboration, handing over full strategic, commercial and decision-making rights to Tysabri to Biogen Idec.
Royalty Pharma further said today that the company remains hopeful that the Board of Elan would consider its offer and recommend it to its shareholders.
The company said it will finance the offer through a combination of existing resources available and new credit facilities arranged by Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities.
J.P. Morgan, BofA Merrill Lynch and Groton Partners are acting as financial advisors to Royalty Pharma.
In pre-market activity, Elan shares are currently trading at $12, down $0.01 or 0.08 percent.
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