Perrigo to buy Elan, get Irish domicile

DUBLIN: US generic drugmaker Perrigo Co agreed yesterday to buy Irish drug company Elan Corp for $8.6 billion in a deal that will hand it royalty rights from a blockbuster treatment and tax savings from being domiciled in Ireland.

The deal ends a bitter takeover saga in which Elan rejected three hostile bids by US investment firm Royalty Pharma amid injunctions, court hearings and a war of words before putting itself up for sale last month.

Michigan-based Perrigo, which manufactures over-the-counter pharmaceutical products for the store brand market and has a market value of about $12 billion, will pay $6.25 per share in cash plus $10.25 per share in stock, a premium of about 10.5% over Elan’s closing price on Friday.

‘‘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 chief executive Joe Papa told Reuters in a telephone interview.

Elan is especially appealing for companies like Perrigo that can easily move their headquarters abroad because of the very low 12.5% corporate tax rate in Ireland, compared with 35% in the US.

Papa said the deal meant that Perrigo — which will fund the deal using $4.35 billion in bridge financing from Barclays Plc and HSBC Holdings Plc plus cash — would lower its effective tax rate to the high teens from around 30% currently.

Reuters reported exclusively last week that Perrigo and New York-based Forest Laboratories Inc were preparing to submit takeover bids and that Elan hoped to announce a sale as early as this week.

Elan, which was founded as a private company in 1969, had also drawn initial interest from Allergan Inc, Mylan International and Endo HealthSolutions Inc, several people familiar with the situation said at the time.

For Elan and chief executive Kelly Martin, who took over the firm in 2003 when its share price had sunk to $2, the deal is vindication for rejecting Royalty’s advances as consistently undervaluing the company.

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.

‘‘I think the value is fair for Elan, it’s fair for Perrigo,’’ Martin told Reuters.

Some Elan investors speculated that any industry buyer could acquire Elan and sell a portion of the royalties on Tysabri to Royalty, which is what the investment firm had wanted all along.

Elan sold its 50% interest in Tysabri to US partner Biogen Idec in February for $3.25 billion but retained royalty rights in the drug, whose sales rose to $1.6 billion last year.

Papa said he had not spoken to Royalty since Perrigo sought to acquire Elan and that he saw the Tysabri royalty, worth up to 25% on future sales, as a very good source to fund future opportunities for the company.