Perrigo is buying Elan Corp for $8.60 billion in a deal that will give the US healthcare firm a base in tax-friendly Ireland.
Ekan has been actively looking for a buyer since rejecting several advances from Royalty Pharma. The latter abandoned its bid to buy the Dublin-headquartered company having finally offered about $8.00 billion, specifically $13 plus a contingent value right that could have added another $2.50 per share depending on the performance of Tysabri (natalizumab), the multiple sclerosis drug Elan sold its stake in to partner Biogen Idec in return for $3.25 billion, plus royalties.
Now Perrigo is making a cash and stock offer which values at $16.50 per share, which represents a 10.5% premium over Elan’s closing share price on Friday (July 26). Once the deal closes, expected before the end of the year, Perrigo shareholders are expected to own 71% of the combined company.
Perrigo chief executive Joseph Papa said the offer “fully takes into account the value of Elan’s assets, including a large cash balance and a double-digit royalty claim on Tysabri”. The latter generated revenues of US$1.6 billion last year and has been growing at a compound annual growth rate of 19%.
He added that the combination “will create an industry-leading global healthcare company with the balance sheet liquidity and operational structure to accelerate our growth and capitalise on international market opportunities”. His counterpart at Elan, Kelly Martin, said the firm “has been constructed over the years to provide a unique and compelling investment thesis for our shareholders”, adding that the transaction “underscores the tremendous value of Elan’s platform”.
One of the attractions of Elan is its Irish base and its relatively low corporate tax rate which stands at 12.5%. Perrigo noted that tax savings will arise from the combined company being incorporated in Ireland, helping it to “more efficiently manage its global cash and treasury operations”. The combination will also result in more than $150 million of recurring after-tax annual operating expense and tax savings.
Perrigo is the world’s largest manufacturer of over-the-counter products for the store brand market. It also makes and distributes generics, active pharmaceutical ingredients, infant formulas and nutritional products. Currently, its primary markets (and locations of manufacturing facilities) are the USA, Israel, Mexico and the UK.
