Perrigo Company (NYSE:PRGO), a U.S. generic drug maker will buy Elan Corporation, plc (ADR) (NYSE:ELN), an Irish drug company for $8.6 billion in a deal, according to which Perrigo will get a royalty right from blockbuster multiple sclerosis treatment and tax savings from being domiciled in Ireland.
Deal will lower the tax rate for Perrigo
Perrigo Company (NYSE:PRGO) based in Michigan manufactures over-the-counter pharmaceutical products. Market capitalization of the company is around $12 billion. For Elan, it will pay $6.25 per share in cash along with $10.25 per share in stock, which is a premium of around 10.5 percent over Elan Corporation, plc (ADR) (NYSE:ELN)’s closing price of Friday, says a report from Guardian.
“We’re excited by what it means for the international expansion. We think it’s financially compelling and when you put it together with an Irish domicile that has operational tax synergies, we think it’s a really compelling story,” Joe Papa, chief executive of Perrigo, said.
Elan Corporation, plc (ADR) (NYSE:ELN) is a good deal for a company like Perrigo Company (NYSE:PRGO) whose headquarters are freely mobile abroad due to very low 12.5 percent corporate tax in Ireland as against 35 percent in the United States. According to Papa, the deal will bring down its tax rate to the high teens from around 30 percent, and it will fund the acquisition through bridge financing from Barclays PLC (NYSE:BCS) (LON:BARC) and HSBC Holdings plc (LON:HSBA) (NYSE:HBC) worth $4.35 billion plus cash.
Deal finally ends Elan’s clash with Royalty pharma
A few days earlier Reuters reported that Perrigo Company (NYSE:PRGO) and New York based Forest Laboratories Inc are working on submitting takeover bids and most probably Elan Corporation, plc (ADR) (NYSE:ELN) will announce the sale this week.
Finally, the deal comes to close as previously Elan Corporation, plc (ADR) (NYSE:ELN) denied three aggressive bids from US investment firm Royalty pharma LLC in giving way to injunctions, court hearings and a war of words before declaring itself for sale last month. Elan was established as a private company in 1969. Allergan, Inc. (NYSE:AGN), Mylan In. (NASDAQ:MYL) and Endo Health Solutions Inc (NASDAQ:ENDP) were other companies interested in Elan.
Kelly Martin, Chief Executive of Elan said that the deal is wholly justified and is in response to Royalty’s attempts to consistently undervalue the company. Last offer of Royalty was $13 in cash per share along with “contingent value right”, which would total to $2.50 per share if Elan Corporation, plc (ADR) (NYSE:ELN)’s multiple sclerosis drug Tysabri achieves some targets.
Biogen Idec Inc (NASDAQ:BIIB), US partner holds 50 percent interest in Elan’s Tysabri for $3.25 billion. However, Elan kept loyalty rights in the drug, whose sales surged to $1.6 billion in the previous year.