Johnson & Johnson Sells Back Shares to Elan

As part of Dutch auction tender offer that Elan (UNKNOWN: ELN.DL2  ) announced last month and which concluded this morning, U.S. health care giant Johnson & Johnson (NYSE: JNJ  ) said today that it is selling back to the Irish biotech 82 million American depository shares of Elan held by JNJ subsidiary Janssen Pharmaceutical.

JNJ will receive $11.25 for each ADS, resulting in an after-tax gain of approximately $213 million. It's not expected to impact the full-year earnings per share guidance it announced Tuesday of $5.35 to $5.45 per share.

A modified Dutch auction tender offer allows shareholders to indicate how many shares they wish to sell and what the lowest price is they wish to receive for them. Elan said today that it has accepted for repurchase 88.9 million shares, representing 14.8% of its existing issued shares, at a price of $11.25 per share, for an aggregate purchase price of $1 billion.

Elan is attempting to thwart its acquisition by pharmaceutical investment firm Royalty Pharma, which originally offered to buy Elan for $11 per share. Elan countered it would be willing to pay between $11.25 and $13 a share for its stock in a $1 billion buyback that would be financed with proceeds received from the sale of its 50% stake in the drug Tysabri. It finalized the sale to Biogen Idec earlier this month.

After Elan initiated efforts to buy back its shares through the Dutch auction, Royalty said it was willing to increase its bid for the biotech to up to $12 a share, but would tie its offer price to the results of the auction.

Elan said 239.7 million shares were tendered, of which 107.4 million were tendered at the strike price of $11.25 by a company that currently holds 17.9% of its shares.  Among other key results of the auction, and exclusive of the single corporate shareholder:

  • 6.1% of the shares were tendered at $12.00 or less.
  • 16% were tendered above $12.00.
  • 4.3% of the shares were tendered at $11.75 or $12.00. 
  • 73.1% of all other shares were not tendered at any price in the offered range of $11.25 to $13.00.

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