The cash and shares deal fits well with Perrigo’s global expansion ambitions, as well as significantly reducing the company’s tax bill, as it takes advantage of Ireland’s corporate tax rate. Perrigo expects savings in tax and operating costs of more than US$150 million by moving its headquarters to Ireland, where corporation tax is 12.5% compared with the US rate of 35%.

The deal will also give Perrigo access to royalty income from Elan’s blockbuster multiple sclerosis treatment Tysabri (natalizumab). Tysabri generated revenues of US$1.6 billion last year and has been growing at a compound annual growth rate of 19%.

‘Through this transaction, Perrigo establishes a diversified platform for further international expansion’, stated Perrigo Chairman and CEO, Mr Joseph C Papa. He added that ‘the combination of Perrigo and Elan will create an industry-leading global healthcare company’ which can ‘capitalize on international market opportunities’.

Under the terms of the agreement Perrigo, which will give Perrigo shareholders 71% of the company, will pay Elan shareholders US$6.25 in cash and 0.07636 in shares of the new Perrigo for each Elan share. This assumes a value of each Elan share at US$16.50 based on the closing price per Perrigo share on 26 July 2013. This somewhat vindicates Elan’s management, who rejected a bid from Royalty Pharma in June 2013 for US$13 a share in cash and a further contingent value right, worth up to US$2.50 a share.

Perrigo started as a packager and distributer of patented medicines and household items back in 1887, and has since expanded into a global generics manufacturer with headquarters in the US and a presence in Australia, China, India, Israel, Mexico and the UK.

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