Drugmaker Perrigo to Buy Irish Elan for USD 8.6 Billion

Perrigo (Allegan, MI, USA), the largest manufacturer of private label over-the-counter (OTC) pharmaceuticals in the United States, has agreed to buy Elan (Dublin, Ireland).

Perrigo and Elan will be combined under the umbrella of New Perrigo, a company recently incorporated in Ireland. New Perrigo, which is expected to be called Perrigo Company, will be led by Perrigo’s current leadership team, headed by Joseph C. Papa, chairman and CEO of the company. Immediately after the closing of the transaction, Perrigo shareholders are expected to receive approximately 71% of the combined company, while Elan shareholders are expected to own approximately 29%.

The amalgamation of the companies is expected to result in more than USD 150 million of recurring after-tax annual operating expense and tax savings as a result of the combined company being incorporated in Ireland with organizational, operations, and capitalization structures that will enable it to more efficiently manage global cash and treasury operations. Some of these synergies will result from the elimination of redundant public company costs, while optimizing back-office support and the global R&D functions.

However, the major advantage for Perrigo is that the deal will allow it to move corporate headquarters to Ireland, where it will enjoy a low 12.5% corporate tax rate, compared to 35% in the United States. The move will also give Perrigo a gateway to the rest of Europe, as well as generating a healthy income from Elans’ remaining 50% interest in royalties from the sales of multiple sclerosis (MS) drug Tysabri. Elan sold its 50% interest in Tysabri to US partner Biogen Idec (Weston, MA, USA; www.biogenidec.com) in February 2013 for USD 3.25 billion, but retained some royalties in the drug, whose sales rose to USD 1.6 billion in 2012.

“We believe this transaction is compelling for Elan shareholders and fully takes into account the value of Elan’s assets, including a large cash balance and a double-digit royalty claim on Tysabri,” said Joe Papa. “We believe the combination of Perrigo and Elan will create an industry-leading global healthcare company with the balance sheet liquidity and operational structure to accelerate our growth and capitalize on international market opportunities.”

“The Elan platform has been constructed over the years to provide a unique and compelling investment thesis for our shareholders,” said Kelly Martin, CEO of Elan. “This transaction underscores the tremendous value of Elan's platform. The new combined company should deliver value, growth and diversification to shareholders for many years to come.”

The acquisition ends a prolonged takeover battle during which Elan rejected three lower bids from US investment firm Royalty Pharma amid injunctions, court hearings, and a verbal slinging match before putting itself up for sale in June 2013.


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Biogen Idec