LONDON/NEW YORK (Reuters) – Plans by Ireland’s Elan Corp (ELN) to sell its drug delivery unit in an auction have been delayed by the credit crisis but some discussions are still continuing, people familiar with the situation said.
Elan and its bankers had hoped to secure second-round bids from private equity firms for Elan Drug Technologies (EDT) by mid-September — a timeline that has been blown away by market turmoil, since funding for potential acquirers is now uncertain.
That may affect the price Elan eventually achieves, assuming the sale gets completed, the sources said. EDT had been expected to fetch as much as $1.3 billion to $1.4 billion.
“They are still trying to do something but there may well be financing issues (for private equity bidders),” said one person.
Other sources said the auction process had slowed right down but agreed it was not dead.
The determination to push on is in contrast to another healthcare sector deal, Montagu Private Equity’s plan to sell bandage maker BSN Medical for around $2.5 billion, which was scrapped this week because of continuing financial turmoil, according to a source close to the transaction.
It was unclear how many private equity firms remained in talks over EDT, although one source the field may have narrowed to just two.
Bain, Candover, Texas Pacific Group and Warburg Pincus had all been named previously by sources as private equity firms interested in the business, before the full banking crisis hit.
The EDT sale was being handled by both Goldman Sachs and Lehman Brothers. However, the collapse of Lehman has not seriously damaged the process, since Goldman was taking the lead anyway.
The spin-off of EDT, which develops new formulations of medicines on a contract basis for other drugmakers, will leave Elan focused on its own biotech drugs and provide it with an opportunity to restructure its debt.
Elan, its bankers and the private equity companies involved declined to comment.
By Ben Hirschler and Megan Davies
(Editing by Quentin Bryar)