Elan says Royalty wanted to take it private before Tysabri deal
DUBLIN May 15 (Reuters) - Royalty Pharma last year urged Elan to hold off on a multi-billion dollar drug deal until it had taken the Irish drugmaker private to boost the compensation the firms' executives would receive, Elan said on Wednesday.
Royalty submitted a $5.7 billion bid for the Dublin-based firm this month, standing by a reduced price in the face of Elan's insistence it is worth more. Elan rejected the $11.25 per share bid last month and is determined to keep its independence.
Elan's charge on Wednesday that Royalty wanted executives to benefit from the sale of its share in blockbuster multiple sclerosis drug Tysabri at the expense of shareholders comes two weeks before those shareholders make up their minds on the bid.
The claim marks the latest effort by Elan management to persuade the company's shareholders to reject Royalty's offer. Chief executive Kelly Martin said in an interview with Reuters this week that he had not spoken to one shareholder who thought Royalty's bid was credible.
In February, Elan sold its 50 percent interest in the drug to U.S. partner Biogen Idec for $3.25 billion plus royalty rights of up to 25 percent. It will hand over a fifth of that royalty stream to shareholders and has also bought back $1 billion of shares with the proceeds.
In its offer document published earlier this month, Royalty revealed that talks between the two began six months before its initial approach, first focussing on Elan buying Royalty before switching to the U.S. investment firm taking Elan private.
However, Elan said in its reply to the offer published on Wednesday that Royalty chief executive Pablo Legorreta told Elan boss Martin at a meeting last October that the Tysabri deal "should not be undertaken or even contemplated until Elan was private and part of Royalty Pharma."
"On October 12, Mr. Legorreta wanted to emphasize the message that the compensation within a private entity would be significantly higher and several times greater than anything he, Mr. Martin, could earn within a public company," Elan said in the document, referring to a phone call between the two.
"(He reinforced) that there should not be any Elan/Biogen Idec transaction regarding Tysabri because there was simply too much value there to unwind in a public market."
Elan added that Legorreta's only stated reason for his change of heart last October to take over Elan, rather than the other way around, was that "as a private entity there is no visibility or scrutiny on executive compensation."
Royalty, attracted by the promise of lucrative revenues from Tysabri, made its first approach for Elan in February. Elan has fought back via manoeuvres to counter the bid, which is contingent on 90 percent acceptances.
On Monday, Elan agreed on a $1 billion deal to buy 21 percent of the royalties that U.S. company Theravance receives from GlaxoSmithKline for its respiratory drugs, the first of what it has said will be a number of acquisitions.
Elan chairman Bob Ingram reiterated in a letter made public on Wednesday that his board unanimously, and without reservation, recommended shareholders reject Royalty's offer, describing it as a "confusing and a continuously moving target."
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