Tags: UPDATE 2-Elan Says Gets Rival Approaches | Holds out for 15.50shr Cash

UPDATE 2-Elan Says Gets Rival Approaches, Holds out for $15.50/shr Cash

Monday, 10 Jun 2013 03:54 PM

* Elan says new Royalty Pharma bid still undervalues company

* Irish firm assessing several other unsolicited enquiries

* Mid-cap rivals circle, $15.50 cash bid could be enough

* Elan voluntarily dismisses suit after Royalty disclosures

By Sophie Sassard and Nate Raymond

LONDON/NEW YORK, June 10 (Reuters) - Ireland's Elan has attracted the interest of a number of mid-sized drug companies and a cash offer of $15.50 per share could be enough to secure its support for a bid, a source with direct knowledge of the situation said on Monday.

Elan, which has resisted an approach from investment firm Royalty Pharma for more than three months in a bitter takeover battle, rejected an increased offer on Monday and said for the first time it was assessing enquiries from other parties.

Elan also voluntarily dismissed its U.S. lawsuit against its suitor. Elan had won temporary relief from a U.S. District Court stopping Royalty from closing its tender but said on Monday it had successfully compelled it to correct disclosure in its bid.

Royalty's third increased bid of $13 cash per share plus an extra $2.50 contingent on multiple sclerosis drug Tysabri hitting certain sales milestones was still wholly inadequate for shareholders, the Dublin-based company said in a statement.

Institutional investors contacted by Reuters last week said they did not think this was Royalty's final offer, and the source with knowledge of the situation said an all-cash variation on the latest offer - which values Elan at a potential $8 billion - would elicit a different response.

"If Royalty made a cash offer of $15.50 a share, Elan would seriously consider it," said the source, who wished to remain anonymous because they were not permitted to speak to the media.

"But Royalty's offers have remained so far away from the company's long-term fair value that Elan has not yet discussed what the magic number would actually be."

A person familiar with Royalty's thinking said that if Elan were really willing to talk about a $15.50 per share cash offer, then "they ought to return a call (from Royalty)."

Royalty Pharma declined comment. Elan shares were 1 percent higher at $13.58 at 1930 GMT.

 

TAX INCENTIVES

The first source said any fresh bid would have to include a substantial portion of cash, because hedge funds have piled into the stock in recent weeks and any new bidder would likely be eyeing up Elan for the tax benefits gained from acquiring it.

Ireland-based companies like Elan are often attractive takeover targets for companies based in the United States because they can offer the acquirer a lower tax rate. The corporate tax rate in Ireland is 12.5 percent, compared with 35 percent in the United States.

Royalty Pharma is already based in Ireland and thus would not gain any special tax benefit from buying Elan.

"They (the potential bidders) are not big pharma companies. It makes sense for U.S. mid-cap listed companies with market cap around $3 to 5 billion or up to $20 billion," the source said.

"These are companies with a pipeline of products which could therefore benefit from the tax break, as opposed to marketing- only companies to which the benefits would not apply."

A spokesman for Elan said the company could not comment any further on who the other interested parties are. Elan said it had instructed its advisors Citigroup to assess the recent unsolicited enquiries.

Elan's management, which has previously said it believes the company should command a value of between $15.50 and $20.80, is also trying to convince shareholders holding off for a bigger payday that recent deals it has struck will add more value.

The company's shareholders meet next Monday to vote on the series of defensive transactions. Royalty's bid is contingent on each transaction being voted down.

In a filing in U.S. District Court in Manhattan on Monday, Elan said it was dismissing its lawsuit with prejudice, meaning it cannot refile it. It said in a statement that Royalty had been forced to file significant amounts of new information.

Among the disclosures filed with the U.S. Securities and Exchange Commission, Royalty said it planned to use excess Elan cash to issue dividends that could be used to pay off the acquisition debt it is incurring in the transaction.

It also clarified that it planned to delist Elan's shares in Ireland and the United States as soon as it obtained 75 percent of the outstanding stock. Royalty lowered the acceptance bar for its bid to 50 percent plus one share from 90 percent last month.

Under Irish law, if Royalty's bid is accepted by 90 percent of shareholders, any outstanding shares would be compulsorily acquired at the same price.

A hearing for the lawsuit had been set for Tuesday. The case is Elan Corporation PLC v. RP Management LLC, et al, U.S. District Court, Southern District of New York, No. 13-3758.

© 2017 Thomson/Reuters. All rights reserved.

 
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UPDATE 2-Elan Says Gets Rival Approaches, Holds out for $15.50/shr Cash
UPDATE 2-Elan Says Gets Rival Approaches,Holds out for 15.50shr Cash
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2013-54-10
Monday, 10 Jun 2013 03:54 PM
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