Sandy soil

29 July 2013 By Robert Cyran Follow @rob_cyran

Over-the-counter drugmaker Perrigo isn’t a natural buyer for the Irish biotech. Elan is largely a shell company with cash and royalty rights to a blockbuster treatment. Tax savings dominate the logic of the $8.6 bln deal. Relying on a practice under growing scrutiny is risky.

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Perrigo, a U.S. maker of over-the-counter pharmaceuticals, said on July 29 it had agreed to buy Elan for $8.6 billion, or $16.50 a share. The deal, which values Elan at $6.7 billion net of the company’s cash, includes $6.25 a share in cash and 0.07636 of new Perrigo shares for each share of Elan.
The price represents a 10.5 percent premium to where Elan shares closed on July 26, the last day of trading before the announcement was made. It is a 56 percent premium to Elan’s value on Feb. 22, the last trading day before news of a bid by Royalty Pharma for Elan became public.
Perrigo says the combination will result in $150 million of after-tax savings due to cost cuts and a reduced tax rate from incorporating Perrigo in Ireland.

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