Elan takeover battle ends after Perrigo agrees to buy company for $8.6bn
Deal will give US generic drugmaker Irish tax advantage
Chairman Robert Ingram and chief executive Kelly Martin of Elan. The new deal is expected to close by the end of this year. Photograph: Alan Betson
The battle for Elan came to an end yesterday after US pharmaceutical giant Perrigo agreed to acquire the company for $8.6 billion (€6.5bn).
Elan put itself up for sale last month after rejecting three hostile bids from private equity firm Royalty Pharma in a bitter takeover battle. Royalty’s final offer was $13 in cash per share as well as a “contingent value right” that could have added a further $2.50 per share if Elan’s blockbuster multiple sclerosis drug Tysabri hit certain sales milestones.
Perrigo has now emerged the winner after offering to pay $6.25 per share in cash and $10.25 per share in stock, in a deal that will provide the American drug maker with $150 million in tax savings.
Michigan-based Perrigo, which has been headquartered in the town of Allegan since 1887, said it would move its tax residence to Ireland and hopes to cut its tax liabilities nearly in half as it grows non-US sales.
The company makes over-the-counter pharmaceuticals for the in-store brand market and has a market value of about $12 billion. It will use $4.35 billion in bridge financing from Barclays and HSBC plus cash to fund the deal, which also brings it Elan’s $1.9 billion cash pile.
The acquisition also gives Perrigo the rights to royalties from Elan’s multiple sclerosis drug Tysabri, which generated $1.6 billion in revenues last year.
Elan sold its 50 per cent interest in Tysabri to Biogen Idec in February for $3.25 billion, but retained royalty rights in the drug, which Perrigo will now have access to.
Perrigo chief executive Joe Papa said the acquisition would cut the company’s effective tax rate from 30 per cent to approximately 17 per cent.
“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.”
Perrigo said the acquisition was expected to result in more than $150 million of recurring after-tax annual operating expense and tax savings.
“Additionally, tax savings are expected to arise from the combined company being incorporated in Ireland with organisational, operations and capitalisation structures that will enable the combined company to more efficiently manage its global cash and treasury operations.”
The combined company will list shares on the New York Stock Exchange and the Tel Aviv Stock Exchange, according to the statement.
Perrigo shares are traded in Israel because the company in 2005 acquired Israeli generic drug maker Agis Industries.
Elan’s chief executive Kelly Martin said the company platform has been constructed over the years to provide “a unique and compelling investment thesis for our shareholders’’.
“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 proposed transaction, which has been unanimously approved by the respective boards of directors of Perrigo and Elan, is expected to close by the end of this year.
The deal will give Perrigo’s shareholders 71 per cent of the new company, while Elan’s investors will own the remainder, according to a company statement.
Elan shares closed up 3.7 per cent yesterday at €11.55 on Dublin’s Iseq after soaring more than 10 per cent at one stage.