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| US drugmaker Perrigo to buy Ireland's Elan for $8.6bn | US drugmaker Perrigo to buy Ireland's Elan for $8.6bn |
| (34 minutes later) | |
| US generic drugmaker Perrigo agreed to buy fellow drug company Elan for $8.6bn (£5.6bn) on Monday in a deal that will hand it royalty rights from a blockbuster multiple sclerosis 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. | 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 and has a market value of about $12bn, will pay $6.25 a share in cash plus $10.25 a share in stock, a premium of about 10.5% over Elan's closing price on Friday. | Michigan-based Perrigo, which manufactures over-the-counter pharmaceutical products and has a market value of about $12bn, will pay $6.25 a share in cash plus $10.25 a 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," said Joe Papa, chief executive of Perrigo. | "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," said Joe Papa, chief executive of Perrigo. |
| Elan is especially appealing for companies such as 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. | Elan is especially appealing for companies such as 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 $4.35bn in bridge financing from Barclays and HSBC plus cash – would lower its effective tax rate to the high teens from about 30%. | Papa said the deal meant that Perrigo – which will fund the deal using $4.35bn in bridge financing from Barclays and HSBC plus cash – would lower its effective tax rate to the high teens from about 30%. |
| Fellow generic drugmaker Actavis's $5bn acquisition of Dublin-based Warner Chilcott in May allowed it to lower its tax rate from 28% to 17%. | Fellow generic drugmaker Actavis's $5bn acquisition of Dublin-based Warner Chilcott in May allowed it to lower its tax rate from 28% to 17%. |
| Reuters reported 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 this week. | Reuters reported 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 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, sources said at the time. | Elan, which was founded as a private company in 1969, had also drawn initial interest from Allergan Inc, Mylan International and Endo HealthSolutions Inc, sources said at the time. |
| Vindication | Vindication |
| For Elan and its 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 a share as well as a "contingent value right" that could have added a further $2.50 a share if Elan's multiple sclerosis drug Tysabri hit certain sales milestones. | Royalty's final offer was $13 in cash a share as well as a "contingent value right" that could have added a further $2.50 a share if Elan's multiple sclerosis drug Tysabri hit certain sales milestones. |
| "I think the value is fair for Elan, it's fair for Perrigo," Martin said. | "I think the value is fair for Elan, it's fair for Perrigo," Martin said. |
| 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. | 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 $3.25bn but retained royalty rights in the drug, whose sales rose to $1.6bn last year. | Elan sold its 50% interest in Tysabri to US partner Biogen Idec in February for $3.25bn but retained royalty rights in the drug, whose sales rose to $1.6bn 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. | 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. |
| Barclays advised Perrigo on the deal, while Citigroup Global Markets, Davy and Davy Corporate Finance, Morgan Stanley & Co International and Ondra LLP acted for Elan. | Barclays advised Perrigo on the deal, while Citigroup Global Markets, Davy and Davy Corporate Finance, Morgan Stanley & Co International and Ondra LLP acted for Elan. |