Royalty Pharma has challenged a decision by the Irish Takeover Panel that it will have to lapse (withdraw) its $6.7 billion offer for Elan if any of four resolutions before Monday's extraordinary general meeting of shareholders is approved.

Judicial review
The Dublin-based fund said it was filing judicial review proceedings "reluctantly". It had sought permission to continue with its takeover bid for the Irish pharma business even if shareholders approve either a further $200 million share buyback or/and the spin-out of its ELND-005 drug programme to a standalone firm.

The panel refused, insisting Royalty stick to earlier stated commitments to withdraw its offer if shareholders approve any of a series of contentious transactions designed to defend its independence.

Royalty said it was concerned the takeover panel's ruling would "deprive" Elan shareholders of the chance to consider its improved offer of $13 a share, plus a contingent value right worth up to $2.50 per share.

Sources close to Elan yesterday expressed doubt about the value of the contingent right, noting that investors in Ireland, in particular, could lose out because of capital gains tax rules. While there is no specific provision for contingent rights in the Irish tax code, fears have been raised that the Revenue could hold investors liable to capital gains on the whole $2.50 even though it might never be activated. The sources said any lower value accorded to the right upon closure of a successful takeover by Royalty would almost certainly be subject to capital gains, even though it will not be triggered until 2015 at the earliest.

Elan maintains that the rights are exercisable only if Elan’s own uppermost projections for Tysabri sales are reached and, in that case, its valuation of the stock, at $21, is $5.50 a share ahead of the Royalty Pharma bid, including the contingent right.

Both sides yesterday tussled over the reasons for Elan’s withdrawing of a case due to be heard yesterday in New York. Elan said it had forced Royalty into additional disclosures while Royalty said Elan had run scared over a challenge to its behaviour in keeping shareholders accurately informed of events.

In a separate release, Royalty confirmed it had still received acceptances for only 7.8 per cent of Elan’s stock by close of business Monday. All proxies in the US must be voted by 3pm New York time tomorrow, Elan said.