* Elan and Royalty had discussed merger before breakdown
* Royalty submits offer document, will only offer fair price
* Elan has already rejected bid, teeing up other deals
* Elan shares down 0.3 pct
(Recasts with background details from offer document)
By Padraic Halpin
DUBLIN, May 2 Elan considered
buying U.S. investment firm Royalty Pharma last year,
six months before Royalty made its approach for the Irish
drugmaker, the offer document for the bid showed on Thursday.
Royalty submitted its $5.7 billion bid on Thursday, 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.
Shareholders, most of whom the Dublin-based company claim
had no interest in Royalty's original proposal, have until May
31 to make up their minds.
As the pair's takeover saga rumbles on, paperwork now shows
that the two companies, who have not spoken since Royalty's
first approach in February, last year discussed ways to work
together. One suggestion was for Elan to buy Royalty to
facilitate its aim then of becoming a public company.
Elan chief executive Kelly Martin initiated the talks last
August, the document said, and top executives from both
companies met once a month until December. By then Royalty was
less interested in going public and instead wished to buy Elan.
Elan indicated at that point that it was focused on doing
deals of its own and the document states that none of its
executives have replied to phone calls or emails from Royalty
chief executive Pablo Legorreta since he informed them of its
intended offer on Feb. 18.
Royalty, attracted by the promise of lucrative revenues from
Elan's multiple sclerosis drug Tysabri, first approached a week
later. Elan fought back via manoeuvres designed to frustrate the
bid, which is contingent on 90 percent acceptances.
In February, Elan sold its 50 percent interest in the
blockbuster MS 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.
Royalty said on Thursday it believed its offer put an
implied value of $3.9 billion on Tysabri, a price shareholders
should welcome, but added it was not prepared to pay over the
odds to add the drug to its stable of royalty streams.
"Royalty Pharma takes note of recent multiple sclerosis
market trends, specifically slowing net patient additions for
Tysabri reported by Biogen for Q1 (2013) ... and the strong
initial launch of (MS pill) Tecfidera," Pablo Legorreta said the
"Although Royalty Pharma continues to be interested in
acquiring Elan, Royalty Pharma is a disciplined financial buyer
and is only prepared to offer a price for Elan that reflects the
fundamental value of the Tysabri royalty."
Last month Royalty lowered its bid to $11.25 a share from an
earlier $12, pricing in the result of a $1 billion share buyback
Legorreta said the buyback was an attempt to frustrate
Royalty's offer and warned shareholders that the alternative
they faced was to accept the risks of Elan management's
Some analysts have questioned Elan's lack of experience in
pulling off major acquisitions as the company tees up a number
of deals to reshape its business. Others believe Royalty needs
to come back with improved terms to tempt shareholders.
Shares in Elan were 0.3 percent lower at $11.56 by 1610 GMT
in New York.
($1 = 0.7580 euros)
(Editing by Sophie Walker)