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Pharmaceutical industry giant Perrigo wins the $8.6 billion battle for Elan of Ireland

There’s a lot happening in the pharmaceutical industry these days and one of the biggest deals so far this year will see US based Perrigo swallow up the Eire based Elan. Perrigo are the only non-Israeli company to have their shares traded on Tel Aviv’s Stock Exchange premier TA-25 index

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 CEO Joseph C. Papa

CEO Joseph C. Papa

/By Yoel Bermant/

 After months of long and complicated negotiations during which Southern Ireland-based Elan bravely held off a number of hostile bids, attendant court cases and a few cases of heated verbal violence from the direction of US investment firm Royalty Pharma, the management team at Elan have finally succumbed to the charms of Joe Papa, chief executive of Perrigo agreeing to accept his company’s takeover offer of $8.6 billion.

Elan and their chief executive Kelly Martin knew that they had a lot to offer a prospective buyer, firstly the highly lucrative royalty rights from a blockbuster multiple sclerosis treatment Tysabri that the company has recently introduced, as well as the opportunity for Perrigo, currently based in Michigan to transfer their head office in Southern Ireland, where the people are friendly and the tax advantages even more so.

Before the acquisition Perrigo will assess to have a market value in the region of $12 billion which will now increase in value by around two thirds to close to $21 billion.

Perrigo obviously sees the value in Elan, and will be paying out $6.25 per share in cash plus a further $10.25 a share in stock, making for a premium of over 10% from Elan’s most recent closing price.

After the deal was announced Joe Papa expressed his excitement regarding his company’s international expansion. “Not only do we think that the takeover agreement is financially compelling, but when you put it together with an Irish domicile that has operational tax synergies, we think it’s a really attractive package, ” summed up in Papa.

 

According a southern Irish-based company such as Elan will always be an especially appealing prospect for companies who are prepared to move their headquarters abroad in order to take advantage of the enticing attractive 12.5% corporate tax rate in Ireland, especially when compared with the 35% that companies in the US are obliged to pay.

According to Joe Papa, the Elan acquisition would effectively lower Perrigo’s overall tax liabilities from around 30% to somewhere between 17% to 18%.

Before Perrigo finally succeeded in acquiring Elan is also reportedly been in the sights of such major pharmaceutical manufacturers as Allergan Inc, Mylan International and Endo HealthSolutions Inc.

Kelly Martin, CEO of Elan stands to make a considerable profit having acquired the company in 2003 when it has a share value of just $2, and his courage and fortitude for withstanding the pressure of Royalty’s unwelcome advances, with Martin constantly claiming that Royalty were blatantly undervaluing the company.

Royalty’s final offer was a maximum of $15.50, with $2.50 of that being dependent on Elan’s multiple sclerosis “wonder drug” Tysabri achieving certain marketing milestones.

In February of this year, Elan sold its 50% interest in Tysabri to US partner Biogen Idec for $3.25 billion while retaining the valuable royalty rights for the drug, whose sales last year was over $1.6 billion.

Stemming industry speculation that any buyer of Elan would immediately begin to sell off some of the royalties on Tysabri, Papa emphasized that he had had no contact with Royalty since negotiations to acquire Elan have begun to reach its crucial point, going on to explain that Perrigo saw the royalty values in marketing Tysabri being one of the focal points for the acquisition, with the estimate of achieving 25% on future sales, making for a first-class source to fund future acquisitions and expansion.

 

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