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Elan blocks Royalty takeover - for now

After rejecting Royalty Pharma's bid Elan wants greater clarity on the deal

Royalty pharma logoElan has won a temporary restraining order forcing Royalty Pharma to put its hostile takeover bid for the Irish firm on hold.

US District Judge William Pauley has temporarily blocked Royalty from “consummating or closing defendants' tender offer” for the outstanding shares of Elan

The Ireland-based firm filed a complaint claiming Royalty Pharma made “material misrepresentations” in its recent tender $6.4bn takeover bid. 

Elan said in its court filing: “Unless promptly enjoined, Royalty Pharma's material misrepresentations and omissions will deny Elan's shareholders the opportunity to properly and meaningfully evaluate Royalty Pharma's lowball revised tender offer and deliver the company into Royalty Pharma's hands at an unfair and inadequate price.”

The company subsequently added in a statement: “Shareholders who do not tender their shares may find themselves trapped in a company under Royalty Pharma's control.” 

On 20 May, Royalty raised its bid for the company from an initial offer that valued it $5.7bn to one that put its worth at $6.4bn, but Elan's board has so far not been swayed. 

The saga has been on-going for a number of months, with a deal looking to be on the cards earlier this year, but these developments will scupper Royalty's plans for a quick sale.

Guillaume van Renterghem, an analyst at UBS AG in London, told Bloomberg that this wasn't about Elan holding out for more money, but rather “a kind of defence mechanism”. 

He said: “This is a purely technical, legal move to make sure investors have all the required information in terms of Royalty Pharma's background.”

Privately-held Royalty Pharma specialises in buying up intellectual property assets in the pharma sector, generating revenues from royalty interests in more than 30 approved or late-stage drugs.

The company's move for Elan comes after the Irish drugmaker signed over rights to its multiple sclerosis therapy Tysabri (natalizumab) to Biogen Idec, in a deal that netted it $3.3bn upfront as well as a royalty steam.

This was followed by a £1-billion deal with Theravance for access to royalties from four of its respiratory drugs, and the recent purchases of two private firms - AOP Orphan Pharmaceuticals AG and NewBridge Pharmaceuticals.

5th June 2013

From: Sales

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