Perrigo acquires Elan for $8.6 billion

Acquisition expected to be immediately accretive for Perrigo in 2014

Kelsey Kaustinen
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ALLEGAN, Mich.—Perrigo Company and Elan Corporation, plc,have announced that following a formal sale process conducted by Elan, the twocompanies have entered into a definitive agreement under which Perrigo will acquireElan via a new holding company—New Perrigo—incorporated in Ireland. Theacquisition will be paid for with cash and stock, with a total transactionprice of approximately $8.6 billion, based on the closing price of Perrigo'sshares as of July 26 ($6.7 billion excluding Elan's cash on hand.) Bothcompanies' boards of directors have unanimously recommended the transaction.
"This is an excellent transaction for Elan shareholders andprovides them with cash consideration as well as the opportunity to benefitfrom the potential upside value of the new company," Robert A. Ingram, chairmanof Elan, said in a press release. "[Joseph Papa, chairman and CEO of Perrigo]and his team have demonstrated exceptional capability and delivery of resultsin building a premier healthcare company over the past number of years. We havethe confidence in Joe and his leadership team to continue to grow and expandits presence on a global scale."
Per the terms of the agreement, once the transaction closes,Elan's shareholders will receive $6.25 and 0.07636 shares of New Perrigo stockfor each share of Elan stock they hold. The transaction values Elan at $16.50per share based on Perrigo's closing price on July 26, which represents a10.5-percent premium over the closing price of Elan American Depositary Sharesas of the same date. Perrigo shareholders will receive one share of New Perrigofor each share of Perrigo they hold upon the closing of the transaction, plus 1cent per share in cash. Once the transaction is complete, ownership of thecombined company is expected to be 71 percent to 29 percent for Perrigoshareholders and Elan shareholders, respectively.
"Through this transaction, Perrigo establishes a diversifiedplatform for further international expansion," noted Papa. "We believe thistransaction is compelling for Elan shareholders and fully takes into accountthe value of Elan's assets, including a large cash balance and a double-digitroyalty claim on Tysabri, a blockbuster product that generated revenues of $1.6billion last year and has been growing at a compound annual growth rate of 19percent. We believe the combination of Perrigo and Elan will create anindustry-leading global healthcare company with the balance sheet liquidity andoperational structure to accelerate our growth and capitalize on internationalmarket opportunities."
The acquisition is expected to be immediately accretive toPerrigo's adjusted earnings per share in 2014, and is expected to result inmore than $150 million worth of recurring after-tax annual operating expenseand tax savings.
"We are very impressed with the accomplishments of Elan'sleadership team. Over the past decades, they have built a company that delivershigh-quality healthcare products with a focus on innovations in science to fillsignificant unmet medical needs around the world," said Papa. "This strategictransaction aligns with Perrigo's acquisition strategy and our previouslystated intentions to grow our international business. We expect New Perrigo tocreate tremendous value for our shareholders for years to come."
SOURCE: Perrigo press release 

Kelsey Kaustinen

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