IRISH biotech firm Elan yesterday accepted an $8.6bn takeover offer from US drug maker Perrigo, just weeks after batting off a hostile approach from Royalty Pharma.
Perrigo will pay $6.25 per share in cash plus $10.25 per share in stock for Elan, in a deal that will see the Michigan firm almost halve its effective tax rate as it shifts its domicile to Ireland.
It will also get access to the revenue stream of Elan’s blockbuster multiple sclerosis drug Tysabri, which executives said yesterday would be used to fund further international expansion.
Perrigo chief executive Joe Papa yesterday called the tie-up a “compelling combination”, and said that overwhelming support for the deal proved that “in this case, one plus one makes at least three”.
By shifting its domicile to Ireland via a holding company to be known as New Perrigo, the US firm will slash its effective tax rate from 30 per cent to as low as 17 per cent.
Perrigo said savings from the lower rate and “tax operational synergies” would amount to as much as $150m annually.
Perrigo will also take on $1.9bn from Elan’s balance sheet, taking the net acquisition price to $6.7bn.
Under Irish takeover rules the deal will need approval from holders of 75 per cent of Elan’s share capital, as well as the sanction of the Irish High Court. The transaction is expected to close by the end of the year.
Analysts expect the deal to be welcomed by the Elan shareholders who rejected Royalty’s approaches, and who yesterday sent its shares 3.68 per cent higher to close at €11.55.
Papa said Ireland would give Perrigo a gateway into the rest of Europe and saw the Tysabri royalty, worth of up to 25 per cent on future sales, as a means to fund future opportunities.
Shares in Perrigo – which is dual-listed in New York and Tel Aviv – fell more than six per cent to close at $125.17 on the NYSE.
ADVISERS | PERRIGO’S BID FOR ELAN
As Perrigo swooped to purchase drugs manufacturer Elan, Morgan Stanley’s co-head of M&A in Europe fought for a better deal for the Irish firm.
Colm Donlon brought previous experience of large-scale deals including the £11bn joint venture between Siemens and Nokia.
Donlon was joined on Elan’s side by Eugenee Mulhern, director of corporate finance at Davy. A member of the Institute of Directors, Mulhern advised the board of First Active on its acquisition by RBS and Ryanair during its pursuit of Aer Lingus.
Advice was also received from Michael Tory, a partner at Ondra LLP, who was previously head of UK investment banking at both Morgan Stanley and Lehman Brothers.
In the States, Citi’s global head of healthcare Chris Hite was working with Elan. He advised the company earlier this year as it spurned a hostile $6.5bn bid from Royalty Pharma.
On the other side of the table, Perrigo was advised in the UK by Derek Shakespeare, a managing director at Barclays Investment Bank, and overseas by Punit Mehta, a managing director in the bank’s New York office.
By Alex Longley