Royalty Pharma Takeover of Elan Temporarily Blocked

Elan Corp. won an order from a U.S. judge temporarily blocking Royalty Pharma AG from attempting a $6.4 billion hostile takeover of the Irish drugmaker after Elan sued to halt what it called a “coercive” tender offer.

U.S. District Judge William Pauley in Manhattan yesterday issued a temporary restraining order blocking Royalty and related parties from “consummating or closing defendants’ tender offer” for the outstanding shares of Elan. Pauly scheduled a June 11 hearing to consider whether to issue a preliminary injunction.

Pauly’s order came after Elan filed a complaint claiming that Royalty Pharma made “material misrepresentations” in its revised tender offer. Elan said “shareholders who do not tender their shares may find themselves trapped in a company under Royalty Pharma’s control.” The offer gives stockholders until June 6 to determine whether to waive their shares, Elan said.

Elan, which receives royalties on Biogen Idec Inc.’s multiple sclerosis treatment Tysabri, said yesterday in a yesterday won a ruling from an Irish court restraining Royalty Pharma from distributing a proxy to shareholders. Judge Gerard Hogan left the injunction in place at a hearing today in Dublin pending further hearings this afternoon.

Royalty Pharma on May 20 issued a revised proposal to buy the stock of the company at $12.50 per American depositary receipt, raising its bid from $5.7 billion to $6.4 billion.

Pharmaceutical Royalties

With a portfolio of 37 approved and marketed products, New York-based Royalty Pharma calls itself the world’s largest investor in pharmaceutical royalties.

George Lloyd, a spokesman for Royalty Pharma, didn’t immediately respond to a voice-mail message left at his office yesterday seeking comment on the case.

Elan said in the lawsuit filed in New York that Royalty Pharma’s tender-offer documents fail to disclose required details of its plans for the company, its management and assets, including whether it plans to change dividend policies and whether it plans to take on additional debt or sell Elan assets to repay a $2 billion bridge loan. Royalty Pharma also didn’t give details of its own corporate structure and sources of capital, Elan said.

“Unless promptly enjoined, Royalty Pharma’s material misrepresentations and omissions will deny Elan’s shareholders the opportunity to properly and meaningfully evaluate Royalty Pharma’s lowball revised tender offer and deliver the company into Royalty Pharma’s hands at an unfair and inadequate price,” Elan claimed in its court filing.

‘Corrective Disclosure’

Elan argues that without a court order, its shareholders won’t be able to properly evaluate the revised tender offer.

Elan seeks an order directing the Royalty Pharma to make a “full and complete corrective disclosure” in connection with the revised tender offer by June 14 and requiring it to extend the tender offer until June 30.

Elan fell 0.5 percent to 9.40 euros at 12:36 p.m. in Dublin trading. The stock fell 1.5 percent to close at $12.47 yesterday in New York.

“This is a kind of defense mechanism from Elan,” Guillaume van Renterghem, an analyst at UBS AG in London, said in a telephone interview. “This is a purely technical, legal move to make sure investors have all the required information in terms of Royalty Pharma’s background.”

Extraordinary Meeting

An extraordinary general meeting of Elan’s shareholders is scheduled for June 17 to consider several transactions proposed after Royal Pharma’s takeover bid, including a $1 billion investment in Theravance Inc.’s royalties. Royalty Pharma has said its offer is contingent on Elan investors rejecting the Theravance deal.

Shareholders will also vote on a $340 million takeover of Vienna-based AOP Orphan Pharmaceuticals AG and plans to issue $800 million in debt.

In a statement yesterday, Royalty Pharma said Institutional Shareholder Services, an independent proxy advisory service, recommended that Elan shareholders vote against the transactions, saying they may have been intended to avoid the takeover bid.

The case is Elan Corp. v. RP Management LLC, 13-CV-3758, U.S. District Court, Southern District of New York (Manhattan).

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