Traverse City Record-Eagle

Business

July 30, 2013

Michigan's Perrigo to buy Elan for $8.6 billion

DUBLIN (AP) — U.S. drugmaker Perrigo agreed Monday to buy Ireland’s Elan for $8.6 billion in a deal that should allow the rapidly growing company to reduce its tax bill and boost its royalty stream.

Perrigo Co. said it would pay Elan Corp.’s investors $6.25 per share in cash and $10.25 in Perrigo stock, an 11 percent premium over Elan’s closing price Friday. Elan shares in Dublin surged 13 percent higher to 12.58 euros ($16.71), above Perrigo’s offer price, following news of the takeover.

After spending four months defeating a series of hostile, lower-priced takeover bids by Royal Pharma, Elan earlier in July said it was open to better offers. Several potential U.S. suitors sought to acquire Elan’s flow of royalties from drugs it helped develop, particularly the multiple sclerosis fighter Tysabri.

Perrigo, which has been headquartered in the small western Michigan 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-U.S. sales.

Perrigo is already the largest maker of generic drugs for major retail chains in the United States, including Walgreens and Wal-Mart. It has rapidly expanded overseas since 2005 with acquisitions in Israel, Britain, Mexico and Australia.

A new Irish base would allow Perrigo’s non-U.S. sales to be taxed at a much lower rate. Ireland imposes 12.5 percent tax on corporate profits, one of the lowest rates in Europe, whereas the United States levies 35 percent.

Perrigo and Elan said a transitional company called New Perrigo would be registered in Ireland and traded on the New York and Israeli stock exchanges. They said the merger meant existing Perrigo investors would own 71 percent of the company, Elan investors the rest.

Perrigo’s chief executive and chairman, Joe Papa, said the move to Ireland should produce more than $150 million in increased net profits annually because of lower taxes and efficiencies from combined operations.

“This strategic transaction aligns with Perrigo’s acquisition strategy and our previously stated intentions to grow our international business,” Papa said.

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