April 15 (Bloomberg) -- Royalty Pharma, an investor in royalty streams from pharmaceuticals, raised its offer to buy Elan Corp. to as much as $7.3 billion, threatening the Irish drugmaker’s plan to embark on its own acquisitions.
The formal bid of $12 per American depositary receipt is higher than a previous informal offer of $11 per ADR and compares with the $12.01 closing price on April 12. The proposal is a “firm, fully financed offer,” New York-based Royalty said in a statement today.
An acquisition would allow Elan shareholders to avoid the risks of Chief Executive Officer Kelly Martin’s strategy of reinvesting a portion of the $3.25 billion Elan received from Biogen Idec Inc. for divesting its stake in the multiple sclerosis drug Tysabri, Royalty said. Elan, based in Dublin, is also buying back $1 billion of stock, a proposal shareholders approved last week.
“This would give shareholders a very attractive alternative to consider against the management acquisition plan,” Royalty Chief Executive Officer Pablo Legorreta said on a conference call with reporters. “We believe a substantial majority of shareholders would view a $12 price as attractive.”
The purchase price may be reduced to as low as $11 per ADR depending on the price Elan pays for shares in the stock buyback, Royalty said.
Elan rose 1 percent to close at 9.10 euros in Dublin. The ADRs fell 0.9 percent to $11.90 as of 1:35 p.m. in New York.
“The board of Elan will, in line with its obligations under Irish takeover law, promptly assess the Royalty Pharma announcement and will advise its shareholders accordingly,” the company said in a statement today.
Elan is interested in buying companies, both listed and closely held, with drug treatments for neurological disorders as well as those for metabolic diseases such as diabetes, it said last month.
The company also said it will pay shareholders dividends directly linked to Tysabri sales as a 20 percent share of the royalty received from Biogen.
Royalty Pharma will pay for Elan using existing resources and new credit facilities to be arranged by Bank of America Corp. and JPMorgan Chase & Co.
JPMorgan, Bank of America and Groton Partners are advising Royalty Pharma.
Founded in 1996, the company owns royalty interests in 37 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. Legorreta, Royalty’s founder, previously worked as a banker at Lazard.
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