Royalty Pharma co-founder writes open letter to board of Elan ahead of egm

Ahead of Elan's egm later today, at which shareholders will vote on a series of acquisitions undertaken by the Irish pharmaceutical firm, the chairman of Royalty Pharma, which has been bidding for the firm, has expressed disappointment at Elan's "unwillingness to negotiate".

In an open letter to the board of Elan, Rory Riggs, chairman and co-founder of Royalty Pharma, suggested that Elan's shareholders will reject both the Theravance and AOP transaction at today's egm.

“By rejecting what we believe were hastily-arranged, value-destructive transactions, Elan shareholders are sending you a clear message rejecting your “strategic plan” for Elan. Your shareholders want you to maximize shareholder value and they want you to do it now,” he said.

Given this “clear message”, Mr Riggs noted that he was “disappointed” that Elan’s advisers rejected efforts to engage over the weekend on a potential negotiated transaction, structured as a scheme of arrangement. This structure has the potential to allow the contingent value right (CVR) included in its further increased offer to become transferable, which may make Royalty Pharma’s offer “even more attractive”.

Last week Elan announced that it was putting itself on the market, but rather than engage in a “likely fruitless effort to find a buyer willing to offer more than we are”, Mr Riggs urged Elan to engage with the US company today.

“Time is short. We believe that our offer is the best alternative for Elan’s shareholders now and will remain the best alternative upon completion of Elan’s sale process,” he said.

Mr Riggs said that shareholders should treat Elan’s discussion of a sale with “some scepticism”, for a number of reasons including:

Elan has effectively been for sale for almost four months and no other potential acquirer appears to have emerged. “If none have emerged in that time, it is most likely because no other bona fide buyer is interested, at least not at a price higher than Royalty Pharma is offering”.

Elan’s announcement comes very near the end of the period Royalty Pharma’s offer is permitted to remain open and “appears to us to be designed primarily to discourage Elan shareholders from tendering into our offer”

Royalty Pharma lacks confidence that Elan will conduct its sale process in “a fair manner or with a realistic price objective” .

If any of the measures voted on at today’s egm are passed, Royalty Pharma has indicated that its offer will lapse. However, it no longer wishes for this to be the case, and has issued judicial review proceedings in respect of the decision of the Irish Takeover Panel requiring it to do so.