Perrigo Company (NYSE:PRGO) agreed to acquire Elan Corporation, plc (ADR) (NYSE:ELN) for $8.6 billion. The agreement puts an end to speculations surrounding the Irish biotech company.

Perrigo

Last month, Royalty Pharma abandoned its takeover proposal after actively urging Elan Corporation, plc (ADR) (NYSE:ELN) to accept its $6.7 billion bid, which was considered inadequate by the board of directors of Irish drug maker. At first, Elan’s board was reluctant to sell the company, but eventually decided to go in that direction after receiving expressions of interest from several parties.

Elan’s terms of agreement with Perrigo

Under the terms of its agreement with Perrigo Company (NYSE:PRGO), Elan Corporation, plc (ADR) (NYSE:ELN) shareholders will receive $16.50 in cash and stock options based on the closing price of the stock on July 26. The acquisition price is higher than the $15.50 per share proposal from Royalty Pharma.

Perrigo Company (NYSE:PRGO) said the transaction will create opportunity for after-tax annual operating expense, and tax savings of more than $150 million.

UBS AG analyst, Ami Fadia opined, “A lower tax rate could put in a much stronger position to grow inorganically going forward.”

Perrigo aims to create a global healthcare company

According to Perrigo Company (NYSE:PRGO), its acquisition of Elan Corporation, plc (ADR) (NYSE:ELN) enables it to create a global healthcare company with an industry-leading growth profile, and to continue to build a differentiated business and expand internationally.

Joseph C. Papa, chairman and CEO of Perrigo Company (NYSE:PRGO) said, “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.”  Papa noted that that Tysabri a blockbuster product that generated $1.6 billion last year and has been growing at a compound growth rate of 19%.

Elan’s chairman and CEO Robert Ingram emphasized that the deal is excellent and provides the company an opportunity to benefit from potential upside value.

The transaction was unanimously approved by the board of directors of the Elan Corporation, plc (ADR) (NYSE:ELN) and Perrigo Company (NYSE:PRGO). Both companies expect to complete the deal by the end of 2013.  Elan Corporation will be renamed Perrigo Company plc, and  incorporated in Ireland.

Jonathan Kreizmanm, an analyst at Clal Finance Batucha Brokerage Ltd, said, “Time will tell if this deal makes sense but this shifts Perrigo from its original focusPerrigo is taking a big step forward and some associated risks of moving out of a sweet spot it was playing in.”