Hilton Said to Price Initial Public Offering at $20 a Share
Elan CEO Says Alternatives Exist If Shareholders Reject Deals
Elan Corp. Chief Executive Officer Kelly Martin said alternative plans are ready in case shareholders vote against transactions it proposed in the face of a hostile takeover offer from Royalty Pharma.
An extraordinary general meeting of shareholders will be held on June 17, when investors will vote on four proposed transactions, including a $1 billion investment in Theravance Inc. (THRX)’s royalties. Royalty Pharma’s takeover offer is contingent on Elan investors voting against the Theravance deal, Royalty has said.
“There’s always a plan B and a C,” Martin told reporters after Elan’s annual shareholder meeting today in Dublin, where the company is based. If the transactions are rejected, “you would see Elan immediately announce a Plan B, because that’s a strong signal from shareholders.”
Elan shareholders have expressed differing views on the value of the Theravance deal, based on varying assessments from brokerages, Chairman Robert Ingram said at the media briefing.
“We take nothing for granted,” Ingram said in response to a question on whether there is concern that the vote will be unfavorable for Elan. “To the degree that there is that uncertainty, we will work very diligently with those shareholders to try and answer those questions.”
The other three proposals Elan shareholders will vote on were announced earlier this month and include a $340 million takeover of Vienna-based AOP Orphan Pharmaceuticals AG. The company also plans to issue $800 million in debt.
Elan is considering several more transactions, including more royalty-type deals, potentially for obesity and diabetes treatments, Martin said.
The company is keeping “an open mind” with respect to Amarin Corp., Ingram said in response to a shareholder’s question. Dublin-based Amarin this year began marketing Vascepa, a treatment for severely high levels of triglycerides. The decision disappointed some investors, who had expected Amarin to sell itself or license the product to a bigger drugmaker.
“That is still an opportunity we are considering,” Ingram said when asked about Vascepa.
Royalty raised its bid for Elan to $6.4 billion on May 20 from a previous bid of $5.7 billion. The all-cash offer is valued at $12.50 per American depositary receipt. The ADRs were unchanged at $12.41 at the close in New York yesterday.
Pablo Legorreta, Royalty’s founder and a former Lazard banker, is pursuing Elan after its chief executive officer, former Merrill Lynch & Co. banker Kelly Martin, initially offered to buy Royalty.
An acquisition by Royalty would enable Elan shareholders to avoid the risks of Martin’s strategy of reinvesting the $3.25 billion Elan received from Biogen Idec Inc. (BIIB) for divesting its stake in the multiple sclerosis drug Tysabri, Royalty has said. Elan has said it will pay investors dividends directly linked to Tysabri sales as a 20 percent share of the royalty received from Biogen.
Fidelity Investments, Wellington Management Co. and BlackRock Inc. (BLK) are among money managers that have cut their stakes in Elan in recent weeks in a sign the firms are content with Royalty Pharma’s offer, Legorreta said in an interview this week.
JPMorgan Chase & Co., Bank of America Corp. and Groton Partners are advising Royalty Pharma. Elan’s financial advisers include Davy Corporate Finance, Morgan Stanley, Ondra Partners and Citigroup Inc.
Founded in 1996, Royalty Pharma owns royalty interests in 38 approved and marketed pharmaceutical products. In 2004, the firm bought Memorial Sloan-Kettering Cancer Center’s U.S. royalty interest in Amgen Inc.’s Neupogen drug.
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