Seth Klarman dilutes his shares in the Elan pharmaceuticals corporation

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Klarman’s private investment group TEST3, Baupost, has sold off two million shares in the Eire based pharmaceuticals group, earning his company an estimated $5.7million on the deal, while retaining a shareholding in Elan valued at close to $100 million.

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Seth Klarman  president of The Baupost Group /Bloomberg

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 / By Albert Hecht /

The throes of a hostile takeover battle is the right time for some profit-taking, according to Seth Klarman, owner of private investment group  Baupost and reckoned to be one of the shrewdest investors around, especially in the pharmaceuticals sector.

And that’s exactly what Baupost have done, with  their stake in Elan Corporation the subject of a hostile takeover bid from New York based Royalty Pharma.

With the takeover bid tottering , Klarman showed expert timing selling off two million shares at the height of a cusp, while retaining 7.1 million shares in Elan, representing a 1.39 percent stock position in the company. A position that deemed it sufficient to legally justifiable to carry out series of regulatory filings in the Irish court, before the shares could be sold.

Klarman picked up his shares in purchasing Elan Corporation, plc one of the world’s most advanced neuroscience based biotech companies, only in the first quarter of 2013, when shares in the company were on sale at an average price of $10.85. Since then Baupost’s stock holdings have risen in value by close to one quarter, and are currently on sale at $13.49.

Elan’s management as well as the bulk of their shareholders has been aggressively fending off hostile takeover offer made by Royalty Pharma, which effectively values the company at $6.7 billion.

In an attempt to block the unwelcome attentions of Royalty Pharma, Elan’s shareholders bandied together to instigate a $200 million share buyback program, sufficient to cause Royalty Pharma to essentially withdraw their bid for the company. It is not known whether Baupost participated in the share buyback program or not.

Klarman’s Baupost also holds a considerable position in another pharmaceutical company with strong ties with Elan. The company,  Theravance is the holder of five royalty participation agreements with Elan, which allows them to enjoy 21 percent of the royalties that Elan earn from patents manufactured under licence from GlaxoSmithKline.

Baupost holds 13.5 million shares of Theravance, equivalent to roughly 14 percent of the value of the company.

Seth Klarman was born and raised in the city of Baltimore, Maryland, going on to study at  Cornell University and the Harvard Business School where he was a Baker Scholar

After graduation, Seth Klarman joined a small mutual fund partnership owned by Michael Heine which eventually grew to become the Heine Securities Corporation.  However Klarman left the partnership in 1982, to form his own venture capital company when just 25 years old. His new fund, the Baupost Group has grown to be one of the largest in the United States, currently managing funds in the excess of $22 Billion, So successful in his management style and diversified in his interests, Klarman has often been considered as “the Warren Buffett of his generation”

Klarman established the Klarman Family Foundation with the intention of supporting a number of valuable causes, particularly relating to the medical profession and research as well a number of Jewish and Israeli causes, including the Facing History and Ourselves program whose role it is to combat anti-Semitism and bigotry in education.

Klarman also helps to support the Israel Project, which is a pro-Israel advocacy group that gathers information on Israel for the press; The Project has been the recipient of a number of donations from the Klarman Family Foundation totaling $4 million.

Seth Klarman is also well known as the author of the best selling book on value investing “Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor”