US giant likely to net $150m in annual tax savings

US pharmaceutical Perrigo will benefit from around $150m (€113m) in annual tax savings from acquiring Elan, its chief executive said yesterday.

Furthermore, when asked by analysts about the possibility of selling the royalty payments from multiple sclerosis drug, Tysabri — one of the assets being inherited by Perrigo through the deal — company chief, Joe Papa said that it was not being planned, due to the chance of escalating royalty streams from a great asset, with that also likely to act as a source of future funding for the company.

As well as the Tysabri royalties, ownership of Elan will give Perrigo a number of international investments; a phase 2 trial compound for a number of illnesses, including Alzheimer’s; an operating base in Ireland and a scaled-up business model — the latter two providing a ready gateway for international expansion.

The transaction will result in a new holding company — likely to be called Perrigo Company plc — which will incorporate Elan and will be listed on the New York and Tel Aviv stock exchanges, but incorporated in Ireland. The Irish base is likely to lower Perrigo’s effective tax rate from around 30% to under 20%.

Perrigo will partially fund the deal through a $4.35bn bridging loan from HSBC and Barclays, the latter also acting as financial advisors to the buyer. A&L Goodbody acted as legal advisor for Elan.

Analysts are not expecting Elan shareholders to vote against the takeover. No date for an EGM has been set as yet, but a 75% acceptance rate will be needed to formally green-light the deal, along with High Court approval. The news of the takeover agreement was warmly received by analysts, with both Berenberg and Deutsche Bank saying it is likely to be accepted by investors.

Elan’s Dublin share price closed at €11.55 yesterday up by over 9%.

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