Elan has announced that it has reached a $75 million (€58.6 million) settlement of the class action taken by US shareholders against it and is to pay a $15 million civil fine in relation to a related investigation by the US Securities and Exchange Commission (SEC).

The announcement, made late last night, removes a major uncertainty hanging over the company and Elan shares bounced strongly in after-hours dealing in New York.

The $75 million settlement of the class action taken by US shareholders against Elan was presented to the New York District Court for preliminary approval yesterday. While judgment was reserved, an Elan statement said that it expects that the court "will issue an order granting preliminary approval of the settlement in due course".

The class action related to Elan's accounting practices, into which the SEC set up an investigation in February 2002. Last night's announcement also said that the company had reached a provisional agreement to end the SEC probe into whether Elan breached securities legislation.

Elan "will neither admit nor deny the allegations," but will pay a $15 million civil fine. The agreement, still to be approved by the commissioners of the SEC, "will conclude all aspects of the investigation with respect to Elan", according to the statement. Elan will not have to restate any of its historical financial results.

The settlements follows an announcement by Elan earlier this month that it had set aside $55 million to settle the class action and the SEC investigation. With its insurer to cover $35 million of the class action settlement, the amount set aside will exactly cover Elan's liability of $40 million for the class action and $15 million for the SEC agreement.

Market analysts have said that a settlement of the class action and the linked investigation by the SEC would be positive for the share price, as it would remove a considerable uncertainty. Chief executive Mr Kelly Martin said it was "an important step forward".

A large group of US shareholders began the class action in 2001-2002. They claimed that Elan violated securities law by improper off-balance-sheet accounting practices, which concealed expenses and artificially inflated Elan's share price.

The share price tumbled following an article on its accounting practices in the Wall Street Journal in early 2002.