In the event that the Possible Offer is not made, Elan Shareholders will have limited control over what assets Elan might acquire (as shareholder approval may not be required). Royalty Pharma believes that the risks associated with Elan's future acquisition strategy, and the impact of this strategy on earnings visibility, are substantial.
Furthermore, unlike the "unique" dividend policy announced by Elan on March 4, 2013 whereby Elan Shareholders receive only 20 percent of the Tysabri Royalty over time, the Proposal would allow Elan Shareholders to receive what Royalty Pharma believes is full value for their Elan Stock immediately upon the completion of an offer.
Royalty Pharma's perspective on the assets, attributes and liabilities of Elan today is contained below.
Elan's hard assets
Royalty Pharma believes that substantially all of Elan's assets, following the completion of the Tysabri Transaction, will consist only of net cash of US$3.1 billion or US$5.1 per Elan Stock (to which Royalty Pharma does not ascribe a premium) and the Tysabri Royalty, of which Biogen now has full operating control.
Royalty Pharma believes that the Tysabri Royalty is a financial rather than strategic asset and should therefore be valued on the basis of financial metrics (i.e. intrinsic value). As described elsewhere in this announcement, Royalty Pharma has prepared an illustrative calculation, which assumes that the Disposed Tysabri Percentage is between 46 percent and 54 percent. Using the mid-point of the Disposed Tysabri Percentage Range would indicate that the Tysabri Transaction ascribed a value of US$3.25 billion (US$5.4 per Elan Stock) to the residual Tysabri Royalty.
Royalty Pharma further believes
|SOURCE RP Management, LLC|
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