Royalty ups Elan bid by 10%

Irish drugmaker announces two more deals plus plans to raise $800 million

Kelly Martin, chief executive of Elan, says the transactions will deliver long-term growth in income and value. Photograph: Alan Betson/The Irish Times

Kelly Martin, chief executive of Elan, says the transactions will deliver long-term growth in income and value. Photograph: Alan Betson/The Irish Times

Tue, May 21, 2013, 09:59

DOMINIC COYLE and FIONA REDDAN

Royalty Pharma last night increased its offer for Elan to $12:50 as its target continued its activity on the acquisition front.

Royalty, which is now offering to pay $6.4 billion for Elan, said however, that it would withdraw its offer if shareholders approve Elan’s recent series of acquisitions .

“The Theravance Transaction public disclosure suggests that the transaction was pursued in haste and without critical confidential information which could significantly impair the value of the asset,” Royalty said last night in a statement.

“Royalty Pharma expects that the same may be true of the transactions announced today.”

It accused Elan’s board of being highly irresponsible in the manner of its recent acquisitions.

Earlier, Elan indicated it had no intention of changing its strategy of blocking any offer by Royalty, in part by locking itself into a series of transactions.

The pharma group announced yesterday morning that it was buying Austrian rare drug company AOP Orphan for €263.5 million.

The Dublin company will pay €175.7 million in cash and €87.8 million in Elan shares.

It also agreed a $40 million deal to acquire a 48 per cent stake in Dubai-based sales and marketing firm Newbridge pharmaceuticals for $40 million. It has the option to purchase the remaining stake in Newbridge by 2015 for a sum of $244 million.

“The timing of this has nothing to do with the Royalty offer itself but it’s being communicated this way because this allows shareholders a choice,” Mr Martin told Reuters in a telephone interview.

In a further move to encourage shareholders to back its proposals at a June 17th extraordinary general meeting, Elan announced a further £20 million share buyback on top of the recent $1 billion buyback.

It also signalled its intent to return to the debt market despite recent adverse comment from one of the ratings agencies, announcing it wants to raise up to $800 million to fund future acquisitions.

This will add to the $1.2 billion in cash that the company retains following a run of deals in the past six weeks.

Elan received $3.25 billion in cash from its US partner Biogen Idec, which it sold its stake in the multiple sclerosis blockbuster Tysabri in February.

As part of that deal, it will also receive royalty income tied to future Tysabri sales - one of the key attractions for Royalty Pharma which specialises in acquiring royalty income streams on patented drugs.

Elan has previously rejected Royalty’s original $5.7 billion offer as fundamentally undervaluing the company.