Perrigo plans €840m Irish restructuring of old Elan unit to pay dividend
US-based drugs giant plans to reconfigure its share capital to create a distributable reserve
Perrigo’s fight with the Revenue Commissioners includes a claim by it that the Irish tax demand is an abuse of power, which the State has denied. Photograph: Adam Bird/Bloomberg via Getty Images
International drugs giant Perrigo is implementing a complex $981.6 million (€840.5 million) restructuring of the balance sheet of one of its main Irish units, which used to trade as Elan, to facilitate the payment of a dividend to its New York-listed parent company.
Company documents filed for Dublin-registered Perrigo Corporation DAC show the US-based drugs giant intends to reconfigure its share capital by this amount to create a distributable reserve, the “principal effect” of which will be to “facilitate the declaration of a dividend” to the parent group.
The transaction documents do not specify the size of the dividend to be paid, but the Perrigo unit in question has total assets of about $730 million.
Its most recent filed accounts, for 2018, show it also had an unrecognised tax asset of about $334 million that could potentially be offset against future profits to reduce its Irish tax bill.
The dividend will be paid to the parent company, Perrigo Company Plc, which is also legally registered in Ireland following the Michigan-based behemoth’s so-called “tax inversion” move to domicile itself here in 2013. The parent is listed on stock markets in the US and also in Israel.
The Irish entity that is being restructured to free up the capital for the dividend was formerly the stock market-listed Elan company that Perrigo bought for $8.6 billion seven years ago to execute its tax-efficient inversion deal. It was later renamed Perrigo Corporation DAC.
Ramifications arising from that deal subsequently led to Perrigo being landed with a €1.6 billion tax bill by Irish authorities two years ago, which the US group has challenged in the courts.
The ongoing row with Irish tax authorities has its source in a deal that Elan did eight months before its buyout by Perrigo, when the then Athlone-based Irish company sold 50 per cent of its blockbuster Tysabri drug to Biogen. As part of that transaction, Elan received $3.25 billion upfront, plus a royalty stream.
Irish tax authorities have argued that Elan’s slice of the deal should have been taxed as a capital gain at 33 per cent instead of income, where tax is levied at 12.5 per cent.
Perrigo has appealed the decision and is awaiting a court decision. The drugs giant has told its shareholders that if it wins the judicial review, the tax demand will be “invalidated” and cannot be reissued. An appeal before an Irish tax commission has been stalled, while it awaits the decision from the courts.
Perrigo has said to investors that if it loses in the Irish courts, it will reactivate its appeal before the tax commission.
The company has vowed to its investors that it will “pursue all available administrative and judicial means” to fight the tax bill from Irish authorities.
Perrigo’s fight with Revenue includes a claim by it that the Irish tax demand is an abuse of power, which the State has denied. The case is being closely watched by multinationals and tax consultants.