Royalty Pharma's hostile run at Elan ended in a Perrigo takeover

Royalty Pharma pursued Irish drugmaker Elan for months, raising its hostile offer to about $12 a share and then adjusting it, only to be rejected each time; Elan's board said the bids grossly undervalued the company and the Tysabri royalty stream.

In June 2013 Elan put itself up for sale, and a shareholder meeting voted down Royalty Pharma's revised offer. Perrigo, a U.S. maker of over-the-counter drugs, emerged from the formal process with a $16.50-per-share cash-and-stock bid — an 11% premium — valuing Elan at about $8.6 billion including cash.

The combined company reincorporated in Ireland, where Elan already sat, giving Perrigo a 12.5% corporate tax rate and an estimated $150 million a year in operating and tax savings, while adding Tysabri royalties and Elan's pipeline.

Elan shareholders received $16.50 per share in cash and stock ($8.6B incl. cash; 11% premium), and Perrigo gained Tysabri royalties and an Irish tax home.

Royalty Pharma's persistent offers forced Elan to prove its value in a sale.

Perrigo's cash-plus-stock structure beat a bidder offering mostly value rights.

The Irish re-domicile made the deal financially transformative for Perrigo.

Tysabri's growing royalty stream justified the premium Elan's board demanded.

A hostile bidder can force a seller into a formal process it cannot control: once the board commits to maximizing value, a friendly buyer can outbid by offering cash, structure and a better story.

Perrigo completed the Elan acquisition by the end of 2013 and reincorporated as Perrigo Company plc. The deal gave it a global platform and a low-tax base; Royalty Pharma walked away empty-handed, while the Tysabri royalties became a core Perrigo asset.