) Board of Directors again rejected Royalty Pharma's offer to
acquire all its shares. Following a thorough review and
consideration process, Elan concluded that Royalty Pharma's most
recent offer also substantially undervalued the company.
Elan strongly advised its shareholders not to take any action
in relation to Royalty Pharma's latest offer.
Last week, Royalty Pharma had increased its offer to $13.00
per share in cash, along with a contingent value right (CVR) up
to $2.50 per share, to acquire all of the shares of Elan. Elan,
however, believes that the offer is wholly inadequate for its
Royalty Pharma's new offer represented an upfront cash value
of $4.9 billion for Elan's Tysabri royalty ($6.2 billion
including the maximum aggregate amount payable under the CVRs).
Royalty Pharma believed that the amount represented a 52% to 92%
premium to $3.25 billion, at which Elan sold approximately half
of its interest in Tysabri to
Biogen Idec Inc.
). Tysabri is marketed for the treatment of multiple
The new offer of $13.00 up to $15.50 per share also
represented a premium of 56% to 97% to the undisturbed enterprise
value at Elan. Royalty Pharma also reduced the Acceptance
Threshold to 50% plus one Elan share in accordance with the terms
of the revised offer document.
Elan shareholders were expected to receive $13.00 in cash
along with one CVR for each Elan share held by them. Every CVR
represented the contractual right to receive additional cash
payments on achieving certain payment events.
Elan believes that the CVRs are well short of Tysabri's value
in the event of achievement of the events which would lead to the
CVR payments. Last month Elan stated that the underlying value of
Tysabri is $11.85 per share with an upside potential of $17.15
We remind investors that Royalty Pharma's previous three
offers of $12.50 per share, $11.25 per share and $11.00 per share
were successively rejected by Elan's Board.
Meanwhile, the Board of Elan continued to recommend its
shareholders to vote in favour of its four previously announced
strategic transactions. The strategic transactions include a
couple of acquisitions in addition to the divestment of its
pipeline candidate ELND005 (agitation/aggression in Alzheimer's
disease and Downs Syndrome).
The company also intends to initiate a cash repurchase
program. However, these transactions will only go through upon
approval from Elan's shareholders after the company's
Extraordinary General Meeting on Jun 17, 2013. The company
believes that these initiatives will help to diversify its
business and reduce risk.
Elan presently carries a Zacks Rank #2 (Buy). Meanwhile,
) currently look better positioned with a Zacks Rank #1 (Strong
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