* Bid raised to $12.50/share from $11.25
* Royalty will withdraw bid if shareholders back Elan deals
* Reserves right to cut acceptance threshold to 50 pct
By Padraic Halpin and Jessica Toonkel
DUBLIN/NEW YORK, May 20 Royalty Pharma
raised its hostile bid for Elan to $12.50 per
share and threatened to withdraw the bid if Elan shareholders
approve a series of defensive transactions announced by the
Irish drug firm.
Royalty Pharma, which buys royalty streams of patented
drugs, said Elan's efforts to reinvent itself through a series
of acquisitions and debt deals were hasty and ill-conceived.
Royalty's new bid for Elan values the company at around $6.4
billion and comes in the face of Elan's insistence that it is
worth more. Royalty previously offered $11.25 a share
Elan rejected the initial bid, described as a "nuisance,"
and stressed that it is determined to keep its independence.
The Dublin-based company said in a statement that its board
would assess the new Royalty Pharma offer but "strongly advised"
shareholders to take no action on the bid at this time.
Earlier Monday Elan announced its second major drug deal in
less than a week.
Royalty said its new, all-cash offer was conditional on Elan
shareholders voting against the acquisitions at a special
shareholder meeting set for June 17.
Royalty said Elan "dramatically overpaid" last week when it
agreed to pay $1 billion for buy 21 percent of the royalties
that U.S. company Theravance receives from
Royalty said its takeover offer "represents 100 percent
liquidity for Elan stockholders today, which Royalty Pharma
believes is a far superior alternative to Elan's high-risk
strategy of hastily arranged and value-destructive
It added, "If the Theravance transaction and the other
transactions announced today serve as a template, Royalty Pharma
believes Elan stockholders should be very concerned about future
value destruction and undue risk-taking by Elan."
Royalty also contends that Elan's board has "compromised its
ability to freely advise Elan shareholders" because according to
the Theravance deal, the board is not allowed to recommend
Royalty Pharma's offer at any price without breaching that
"Royalty Pharma believes it is highly irresponsible and
'off-market' to agree to such provisions," the firm said in a
statement announcing its sweetened offer.
Elan sold its 50 percent interest in Tysabri, a multiple
sclerosis drug, to U.S. partner Biogen Idec in February
for $3.25 billion plus royalties of up to 25 percent, and used
the proceeds to reward investors through a share buyback and to
plot its spending spree.
Royalty also said on Monday that it reserved the right to
reduce the acceptance threshold for its increased offer to 50
percent plus one Elan share from 90 percent previously.
Elan shares in New York, up more than 10 percent
since Royalty's first approach in February, were up 3 percent to
$12.04 in afternoon trading.
In a string of deals over the past few days, Elan has
basically transformed itself into a specialty pharma roll-up of
companies from around the world, said Michael Yee, an analyst
with RBC Capital Markets.
Now it is up to shareholders to decide if they want to take
the risk of letting management try to execute this strategy, he
"The company has limited experience in acquiring,
consolidating and executing on products in the last five years,"
Yee said. "That is why it could be risky."