ROYALTY Pharma plans to table a formal offer for Elan valuing it at about $7.3bn (€5.6bn) as Royalty boss Pablo Legorreta has warned the Irish drug company "not to mess" with the terms of its share buyback programme that ends tomorrow.
US-based Royalty Pharma has confirmed it will table a formal offer to buy Elan either later this week or early next week after the Irish company completes the so-called Dutch auction that aims to return $1bn in cash to its shareholders via a buyback.
The announcement by Royalty ends a weeks-long phony war where Elan has dismissed the overture from the New York firm and Royalty was told by the Takeover Panel to either "put up or shut up" by May 10.
But Mr Legorreta said that Elan still had a window to raise the minimum price it would pay per share under the buyback. He claimed that if Elan did that in an effort to undermine the Royalty offer, it would adversely affect remaining shareholders.
"If management does anything to mess around with the Dutch auction, they will be acting against shareholder interests," insisted Mr Legorreta in an interview with the Irish Independent.
Elan is undertaking its share buyback using part of the $3.25bn in proceeds it recently received for selling its 50pc stake in multiple sclerosis drug Tysabri to Biogen Idec. It is now effectively left with no products and a strategy that aims to use the other $2bn-plus in cash to make strategic investments in other drug firms.
Royalty has claimed Elan shareholders would be better to accept an offer to buy Elan rather than rely on uncertain outcomes if that cash is invested by Elan management.
Mr Legorreta said he had spoken to shareholders representing between 50pc and 60pc of Elan's shares since Royalty first indicated in February that it was interested in acquiring Elan.
He said that following those talks and having obtained a "sense of the price expectation", he's "very confident" that Royalty would be able to secure control of Elan. US drug firm Johnson & Johnson owns 18pc of Elan. Mr Legorreta added that the impending offer wasn't conditional on due diligence being undertaken.
"The board of Elan will, in line with its obligations under Irish takeover law, promptly assess the Royalty Pharma announcement and will advise its shareholders accordingly," said Elan.
Royalty will offer as much as $12 per Elan share depending on the outcome of the Dutch auction, which determines the price shareholders are willing to sell their shares for under the buyback programme.
If the Dutch auction settles on a strike price of either $11.75 or $12 per Elan share, Royalty will table an offer for the outstanding shares of $12 per share. But if the strike price is between $12.25 and $13, then Royalty will only offer to pay $11 per remaining Elan share.