Royalty Pharma Extends $6.4 Billion Elan Takeover Offer

Royalty Pharma, an investor in royalty streams from pharmaceuticals, extended the deadline for its offer to buy Elan Corp. (ELN) for $6.4 billion.

The all-cash bid of $12.50 per American depositary receipt will expire at 8 a.m. New York time on June 21, Royalty said in a statement today. Elan Chief Executive Officer Kelly Martin, a former Merrill Lynch & Co. banker, and the rest of Elan’s board have rejected the unsolicited bid.

Pablo Legorreta, the founder of closely held Royalty who is a former Lazard banker, is pursuing the Dublin-based company after Martin initially offered to buy Royalty. Martin has announced transactions including a $1 billion investment in Theravance Inc. (THRX)’s royalties since Elan was approached. Elan shareholders will vote on the proposal on June 17, which will determine whether Royalty will go ahead with its offer.

In addition to the investment in Theravance’s royalties, shareholders will vote on June 17 on a $340 million proposed takeover of Vienna-based AOP Orphan Pharmaceuticals AG, the spin-out of an experimental drug called ELND005 for Alzheimer’s disease to Speranza Therapeutics and a $200 million share repurchase program.

Takeover Panel

Separately, the Irish Takeover Panel said today it rejected a request by Royalty to amend the terms of the bid so that it won’t have to terminate the offer if either the ELND005 resolution or the share buyback is approved. Under the ruling, if Elan shareholders vote in favor of any of the proposed transactions on June 17, Royalty must end its revised offer, the panel said.

Elan’s U.S. shares rose less than 1 percent to $12.68 at the close in New York.

Elan is also trying to block Royalty’s takeover through legal proceedings. On June 3, U.S. District Judge William Pauley in Manhattan issued a temporary restraining order blocking Royalty and related parties from “consummating or closing defendants’ tender offer” for the outstanding shares of Elan. Pauley scheduled a June 11 hearing to consider whether to issue a preliminary injunction.

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 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.

‘Dramatically Overpaid’

Elan has “dramatically overpaid” in the Theravance deal by agreeing to spend $1 billion on 21 percent of a portion of royalties when all of South San Francisco, California-based Theravance was trading at $3.5 billion, Royalty has said.

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. For example, in 2004, the firm bought Memorial Sloan-Kettering Cancer Center’s U.S. royalty interest in Amgen Inc.’s Neupogen drug.

To contact the reporter on this story: Makiko Kitamura in London at mkitamura1@bloomberg.net

To contact the editor responsible for this story: Kristen Hallam at khallam@bloomberg.net

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