Perrigo to buy Elan for US$8.6bn

Perrigo, a US manufacturer of over-the-counter and generic medicines, has agreed to buy Ireland-based biotechnology firm Elan Corporation for US$8.6bn in a cash and shares deal, to create a global healthcare company and take advantage of Ireland’s corporate tax rate of 12.5%.

The deal ends a takeover battle in which Elan rejected three hostile bids from US investment firm Royalty Pharma.

‘Through this transaction, Perrigo establishes a diversified platform for further international expansion,’ said Perrigo Chairman and CEO, Joseph Papa.

‘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, a blockbuster product that generated revenues of $1.6bn last year and has been growing at a compound annual growth rate of 19%,’ added 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 capitalise on international market opportunities.’

Through this transaction, Perrigo establishes a diversified platform for further international expansion

Elan’s CEO Kelly Martin, said: ‘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.’

Michigan-based Perrigo will pay Elan shareholders $6.25 in cash and 0.07636 shares of the combined company for each share in Elan. This values each Elan share at $16.50 based on the closing price of each Perrigo share last Friday (26 July).

The deal, which has been approved by the boards of directors of Perrigo and Elan, is expected to close by the end of this calendar year.

At the close of the transaction, Perrigo and Elan will be combined under New Perrigo, a new company incorporated in Ireland, where Elan is incorporated today. New Perrigo, which is expected to be called Perrigo Company plc or a variant thereof, will be led by Perrigo’s current management team.

We are very impressed with the accomplishments of Elan’s leadership team

Elan’s current portfolio includes royalties from Multiple Sclerosis (MS) treatment Tysabri (marketed and distributed by Biogen Idec), as well as a neuropsychiatric pipeline. Tysabri had a 19% compound annual growth rate over the 2008–2012 period. Elan currently earns a 12% royalty on global net sales of Tysabri. From 1 May 2014 onwards, the royalty increases to 18% on annual net sales up to $2bn, and to 25% on annual net sales above this amount.

The combination is expected to result in more than $150m of recurring after-tax annual operating expense and tax savings.

Papa concluded: ‘We are very impressed with the accomplishments of Elan’s leadership team. Over the past decades, they have built a company that delivers high quality healthcare products with a focus on innovations in science to fill significant unmet medical needs around the world. This strategic transaction aligns with Perrigo’s acquisition strategy and our previously stated intentions to grow our international business.’