Eli Lilly and Company (NYSE: LLY) today announced that, based on preliminary results, its previously-announced offer for shareholders to exchange their shares of Lilly common stock for shares of Elanco Animal Health Incorporated (NYSE: ELAN) owned by Lilly was oversubscribed. The exchange offer expired at 12:00 midnight, New York City time, at the end of the day on March 8, 2019. Under the terms of the exchange offer, 4.5121 shares of Elanco common stock will be exchanged for each share of Lilly common stock accepted in the exchange offer.
According to the exchange agent, Computershare Trust Company, N.A., 492,109,007 shares of Lilly common stock were validly tendered and not validly withdrawn, including 179,675,890 shares that were tendered by notice of guaranteed delivery. Today, Lilly intends to accept 65,000,775 of the tendered shares in exchange for the 293.29 million shares of Elanco common stock owned by Lilly. Because the exchange offer was oversubscribed, Lilly is accepting only a portion of the shares of its common stock that were validly tendered and not validly withdrawn, on a pro rata basis in proportion to the number of shares tendered. Shareholders who owned fewer than 100 shares of Lilly common stock, or an “odd-lot,” who have validly tendered all of their shares, will not be subject to proration, in accordance with the terms of the exchange offer.
Based on the total number of shares of Lilly common stock reported to be tendered prior to the expiration of the exchange offer, it is estimated that approximately 13.2 percent of the tendered shares of Lilly common stock will be exchanged, assuming all shares tendered by guaranteed delivery procedures are delivered under the terms of the exchange offer. This preliminary proration factor is subject to change based on the number of tendered shares that satisfy the guaranteed delivery procedures, as well as the number of “odd-lot” shares that were validly tendered and are not subject to proration. Lilly expects to announce the final proration factor on March 13, 2019, promptly following the expiration of the guaranteed delivery period.
Shares of Lilly common stock tendered but not accepted for exchange will be returned to the tendering shareholders in book-entry form promptly. In addition, the exchange agent will promptly credit shares of Elanco common stock for distribution in the exchange offer in book-entry form to accounts maintained by the Elanco transfer agent for tendering shareholders who have validly tendered and not validly withdrawn their shares of Lilly common stock. Checks in lieu of fractional shares of Elanco common stock will be delivered after the exchange agent has aggregated all fractional shares and sold them in the open market.
Reflecting the exchange of 65.0 million shares of Lilly’s outstanding common stock, the company currently estimates full year 2019 weighted-average diluted shares outstanding to be approximately 938 million for GAAP earnings per share and 924 million for non-GAAP earnings per share. Because the exchange offer was effective on March 11, 2019, Lilly will recognize only a partial-year benefit for the reduction in its common stock for GAAP weighted-average diluted shares outstanding. For non-GAAP weighted-average diluted shares outstanding, however, the company will assume that the exchange offer occurred as of January 1, 2019. Management believes that reducing full-year 2019 non-GAAP weighted-average diluted shares outstanding by the 65.0 million shares exchanged can be useful as investors compare results across periods. Lilly will provide updated GAAP and non-GAAP financial guidance in its Q1 2019 earnings announcement scheduled for April 30, 2019.
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