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Elan Turns Down Royalty's Offer - Analyst Blog
4/22/2013 1:12:00 PM
Elan Corporation 's ( ELN ) Board of Directors recently rejected Royalty Pharma's offer to acquire all the shares of Elan for $11.25 or less per share.
Elan' Board of Directors believed that Royalty Pharma's offer significantly undervalued the company's current business platform and its future prospects. The Board was unanimous in rejecting the offer. Meanwhile, the company advised its shareholders not to take any action in relation to the Royalty Pharma offer.
Last week, Elan announced the final results of its modified Dutch auction tender offer, of a maximum aggregate value of $1 billion, to repurchase its ordinary shares, including ordinary shares represented by American Depositary Shares. As a result of the tender offer, the Dutch auction strike price stands at $11.25.
We note that 1 ADS is equal to 1 share of Elan.
Following the determination of the Dutch auction strike price at $11.25, Royalty Pharma confirmed that its offer for each outstanding share and ADS of Elan is also the same. Earlier Royalty Pharma announced its offer at different prices for different Dutch auction strike prices, where it mentioned that if the strike price is $11.25, it will offer the same for each outstanding share and ADS of Elan.
Royalty Pharma had also stated that it was not aware of Elan's current cash position. If the latter does not disclose its cash position, Royalty Pharma would have to reduce its offer by $1.00 and Elan's shareholders would have an option to receive up to $1.00 in cash depending on its cash position.
Meanwhile, Elan closed its Tysabri (natalizumab) collaboration transaction with Biogen Idec ( BIIB ) earlier this month. As a result, Biogen gained full strategic, commercial and operational control over the drug.
Elan, a biotechnology company, currently carries a Zacks Rank #3 (Hold). Currently, well-placed biotech stocks include WuXi PharmaTech ( WX ) and QLT Inc. ( QLTI ). Both stocks carry a Zacks Rank #1 (Strong Buy).
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