Elan has ditched a complaint against Royalty Pharma in a U.S. District Court, having filed the lawsuit against Royalty for lacking disclosures in its takeover bid last week. Ireland-based Elan ($ELN) is claiming a victory because it dropped the lawsuit after Royalty responded with additional disclosures in its latest and increased bid to acquire Elan.
|Elan CEO Kelly Martin|
The legal news from Monday is a minor event in the unfolding drama about the fate of Elan, which has undergone a makeover in recent years through a series of deals led by CEO Kelly Martin. Perhaps more significant, Elan's board unanimously rejected Royalty's latest bid of $13 per share and $2.50 contingent on sales performance of Tysabri, also saying that it hired Citigroup to assess "several recent unsolicited enquires."
Apparently, Royalty isn't the only outfit interested in acquiring Elan. An unnamed source told Reuters that the other interested parties are mid-sized pharma groups. Those companies could benefit from tax advantages of owning a business in Ireland, where the corporate tax rate is 12.5%. Yet the details about those other inquiries of interest remain scant, and right now Royalty is the only publicly known outfit in the market to acquire Elan.
Elan's board says that Royalty's latest offer "grossly" undervalues the company's interest in Tysabri, according to a statement. The strongly worded rejection shows Elan thinks it could fetch way more in an acquisition deal. Royalty has shown a willingness to go higher, and one source told the news services that Elan would take interest in an offer of $15.50 in cash.
"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," the source said.
The business press has rabidly followed every twist and turn in the Elan-Royalty drama, and the two companies seem to communicate mostly through news articles and press releases. And the companies seem to be getting closer on price.
On June 17, Elan's shareholders will vote on whether to approve a string of defensive transactions the company has undertaken, including Elan's proposed $1 billion investment in Theravance's ($THRX) royalties for lung drugs. Royalty would take its potential $8 billion offer off the table if any of the deals are approved.