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Perrigo and Elan to create global healthcare company

Staff writer |
Perrigo Company announced it will acquire Elan Corporation via new holding company incorporated in Ireland, New Perrigo. The cash and stock transaction is valued at approximately $8.6 billion.

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The proposed transaction, which has been unanimously approved by the respective boards of directors of Perrigo and Elan, is expected to close by the end of calendar year 2013. At the close of the transaction, Perrigo and Elan will be combined under New Perrigo, a new company incorporated in Ireland, where Elan is incorporated today.

New Perrigo, which is expected to be called Perrigo Company plc or a variant thereof, will be led by Perrigo's current leadership team.

Elan's current business portfolio includes royalties from Multiple Sclerosis (MS) treatment Tysabri (marketed and distributed by Biogen Idec, Inc.), along with a neuropsychiatric pipeline with near term value-creating opportunities. Tysabri had a 19% compound annual growth rate over the 2008–2012 period. Elan currently earns a 12% royalty on global net sales of Tysabri.

From 1 May 2014 onwards, the royalty increases to 18% on annual net sales up to $2.0 billion, and to 25% on annual net sales above this amount. The Tysabri cash flows are highly sustainable with multiple barriers to entry, analogous to the fundamentals of Perrigo's core business. Further upside exists if Tysabri is approved for Secondary Progressive MS.

Under the terms of the Transaction Agreement, at the closing of the acquisition, Elan shareholders will receive $6.25 in cash and 0.07636 shares of New Perrigo for each Elan share. The transaction values each Elan share at $16.50 based on the closing price of Perrigo shares on 26 July 2013, which represents a premium of approximately 10.5% compared to the closing price of Elan American Depositary Shares on 26 July 2013, the last trading day prior to the date of this announcement.

The transaction values the entire share capital of Elan at approximately $8.6 billion based on Perrigo's closing share price on 26 July 2013. Net of cash, the transaction is valued at $6.7 billion. Perrigo shareholders will receive one share of New Perrigo for each share of Perrigo that they own upon closing and $0.01 per share in cash. The transaction will be taxable, for U.S. federal income tax purposes, to both the Elan shareholders and the Perrigo shareholders.

Immediately after the closing of the transaction, Perrigo shareholders are expected to own approximately 71% of the combined company while Elan shareholders are expected to own approximately 29%. Shares of New Perrigo will be registered with the U.S. Securities and Exchange Commission and are expected to trade on the New York Stock Exchange and the Tel Aviv Stock Exchange.


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