Elan Inviting Royalty Pharma Bid Shows Hostility Easing

Elan Corp. is seeking a buyer and will invite Royalty Pharma, whose $6.7 billion bid it rejected, to participate, suggesting the two companies may end a standoff that has lasted almost four months.

Elan’s board authorized a formal sale process “in light of the expressions of interest received to date,” the Dublin-based company said in a statement yesterday. Investors shouldn’t tender stock into the current Royalty Pharma offer, Elan said.

Shareholders will meet in Dublin on June 17, when Elan will reveal voting results on four transactions proposed by Chief Executive Officer Kelly Martin. Royalty’s takeover plans, begun in February and unanimously rejected by Elan’s board, is contingent on investors voting against all four proposals.

“By going into a formal sale process and inviting Royalty in, Elan looks to be taking the hostility out a bit,” said Adrian Howd, an analyst at Berenberg Bank in London. “They’re saying, ’Whatever happens on Monday, we’re in a sale process now, so if you’re interested, come and talk with us.’”

Elan shares rose 8.4 percent to close at 10.07 euros in Dublin, their biggest increase since May 25, 2012. Trading volume was 74 percent of the three-month average.

Royalty Pharma said yesterday that a majority of investors voted against three of the proposals. Shareholders appeared to favor a $200 million stock buyback plan, Royalty Pharma said after reviewing the votes so far. Royalty Pharma is seeking permission from the Irish commercial court and takeover panel to alter its contingency terms.

Under Consideration

The other three transactions under consideration are a $1 billion investment in 21 percent of Theravance Inc.’s royalties, a $340 million takeover of Vienna-based AOP Orphan Pharmaceuticals AG, and the sale of an experimental drug called ELND005 for Alzheimer’s disease.

“The Elan board and management are aligned in maximizing the full value potential of the business on behalf of its shareholders,” Elan said.

There can be no assurance that any sale process will be fair and realistic, Royalty Pharma CEO Pablo Legorreta said yesterday in an e-mailed statement.

“The only thing that is certain for Elan shareholders is Royalty Pharma’s cash-confirmed offer,” Legorreta said. “If shareholders want to have the option to choose between Royalty Pharma’s offer or a sale process, they should vote against all four of Elan’s proposals, especially the share repurchase program.”

Elan’s financial advisers are Citigroup Inc., Davy Corporate Finance, Morgan Stanley and Ondra Partners. JPMorgan Chase & Co., Bank of America Corp. and Groton Partners are advising Royalty Pharma.

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