Royalty Pharma has announced a strategic move to acquire its external manager, RP Management, LLC, in a bid to simplify its corporate structure and enhance shareholder value. This acquisition is expected to generate significant financial benefits, including cash savings exceeding $100 million in 2026 and more than $175 million by 2030, with cumulative savings projected to surpass $1.6 billion over the next decade. The internalization of RP Management is anticipated to improve shareholder alignment, enhance corporate governance, and increase economic returns on investments. Additionally, the company has authorized a substantial $3 billion share repurchase program, with plans to buy back $2 billion worth of shares in 2025, subject to market conditions. This move is seen as a response to the discount at which Royalty Pharma's shares are trading relative to their intrinsic value.
The acquisition of RP Management involves a transaction valued at approximately $1.1 billion, primarily paid in long-term deferred equity, which will vest over 5 to 9 years. This structure aims to replace cash bonuses with equity, further aligning management interests with those of shareholders. The transaction is expected to close in the second quarter of 2025, pending shareholder approval and regulatory clearances. Pablo Legorreta, CEO of Royalty Pharma, emphasized the strategic benefits of this internalization, stating that it will yield financial and strategic advantages for shareholders while maintaining the company's capacity for new royalty transactions and dividend growth.
Royalty Pharma's stock has surged 12.69% to $29.525 as of 1:52 pm on January 10th, up from its previous close of $26.2.