May 28, 2013
/PRNewswire/ -- Royalty Pharma announces today that it has issued an investor presentation related to Royalty Pharma's increased offer to acquire Elan Corporation, plc (NYSE: ELN) for
per share in cash. The presentation outlines why Royalty Pharma believes Elan Stockholders should accept its compelling, fully-financed and cash confirmed offer, which is not conditional on due diligence. Royalty Pharma also discusses why Elan Stockholders should be concerned about questionable decisions made by Elan and its leadership in recent weeks. The presentation may be found at
Several key points from the presentation are included here below:
HIGHLIGHTS COMPELLING VALUE OFFERED BY ROYALTY PHARMA
STOCKHOLDERS SHOULD VOTE AGAINST ELAN'S HIGHLY UNCERTAIN AND UNDISCIPLINED STRATEGY FOR THE FUTURE
- Royalty Pharma is Offering a Compelling Premium: Royalty Pharma's $12.50 all cash per share offer is an extremely compelling value proposition for Elan Stockholders that represents a 42% premium to the price paid by Biogen in the Tysabri Transaction and an overall premium of 45% to the Undisturbed Elan Enterprise Value.
- Acceptance Threshold Now Just 50% Plus One Share: Notably, Royalty Pharma has agreed to waive down the Acceptance Threshold for the Increased Offer from 90% to 50% of the Maximum Elan Shares Affected plus one Share, provided that all conditions of the Increased Offer are satisfied.
- Royalty Pharma's Offer is Contingent on Stockholders Not Approving Elan's Proposed Transactions: If Elan Stockholders approve Elan's proposed transactions, which would result in significant value destruction, Royalty Pharma's $12.50 all cash offer will be withdrawn.
- Royalty Pharma Questions Whether Elan's Board is Acting in Shareholders' Best Interests: Despite Royalty Pharma's highly compelling revised offer, Elan's Board has steadfastly refused to engage. Instead they have pursued what Royalty Pharma regards as value destructive and highly risky transactions entered into in haste. In fact, in the Theravance Transaction the Elan Board obligated itself to recommend the transaction to Elan Stockholders with no "fiduciary out" even if there is a material adverse change. Furthermore, it appears that Elan struck this deal without seeing the unredacted GSK contract, and is thus unaware of the exact language of many provisions of that contract which could reduce value. Many Wall Street analysts have said that by paying $1 billion for this subset of the Theravance royalties -- which excludes the potentially most attractive Theravance royalties -- Elan is overpaying by $300-500 million.
- Royalty Pharma Believes Elan's Highly Defensive M&A Strategy Has Destroyed Value: Elan has undertaken a frenetic jumble of transactions designed primarily, in Royalty Pharma's view, to fend off Royalty Pharma's offer. The end result of these transactions is to create a "New Elan" with one operating business that has $76 million of annual distribution revenue from aging products in Eastern Europe. If these transactions are approved, Elan will, in Royalty Pharma's view, have destroyed value by overpaying.
- Independent Third Parties Agree That By Paying $1 billion Elan Has Dramatically Overpaid: Despite Elan selectively quoting one bullish analyst in its EGM Circular, many third parties have published reports or made public comments that assert that Elan has overpaid in implementing its defensive M&A strategy. Some key quotes include:
- Ronny Gal, Bernstein Research, May 13: "[The deal] suggests a sum of the parts value for Theravance of $6 billion... That's about double where Theravance shares were when they closed on Friday… It is tough to see how the assets acquired, risk discounted, would command such a value… the purchase acts as 'poison pill' by adding assets Royalty Pharma may not want to buy"
- Richard Parkes, Deutsche Bank, May 13: "[The Theravance transaction] looks aggressive considering the competitive markets these drugs are expected to launch into. Using our current published forecasts for GSK of Breo sales of £1.1bn and Anoro sales of £628m (risk adjusted at 60%), justifies an NPV of $500m"
- Jo Walton, Credit Suisse, May 23: "Based on our GSK forecasts for these four respiratory drugs, we estimate the value of Elan's royalty share to be worth c. $535m, almost half the amount offered by Elan ( $1bn)."
- Proceeds from Tysabri Transaction Will be Gone if Elan's Proposed Transactions Are Approved: Elan's Board and Management team has shown its stockholders that it intends to spend the $3.2 billion proceeds from the Tysabri transaction on what Royalty Pharma regards as an incoherent strategy involving hastily executed, ill-conceived acquisitions and investments, a Dutch Auction where one shareholder received 92% of the proceeds, debt redemption and subsequent issuance, destroying shareholder value while incurring significant "frictional" costs.
- Elan's Actions have, in Royalty Pharma's View, Created a Huge Earnings Gap: Royalty Pharma believes that Elan's transactions do not come close to replacing the quantity or quality of earnings that Elan gave up by selling half of its Tysabri interest. In fact, the presentation shows how Elan's stock price could fall well below $10 per share if Elan Stockholders approve the proposed transactions and Royalty Pharma's offer is withdrawn.
"It is clear to us that Elan's Board and Management team are more interested in pursuing what we regard as defensive, value-destructive transactions instead of engaging with us on our highly attractive offer," said
, Chief Executive Officer of Royalty Pharma. "Elan has laid out its vision for the "New Elan" and it looks like it will be a highly uncertain future for stockholders given some of the decisions made by management, which seem to us to be designed primarily to fend off Royalty Pharma. I am confident that stockholders will recognize the value of our all-cash offer and vote down the company's proposed transactions. We are looking forward to continuing our ongoing constructive dialogue with Elan's shareholders."
J.P. Morgan, together with its affiliate J.P. Morgan Cazenove, BofA Merrill Lynch, together with its affiliate Merrill Lynch International, and Groton Partners are acting as financial advisers to Royalty Pharma.