Perrigo Company to Acquire Elan Corporation, plc for US$8.6 Billion, Becoming Premier Global Healthcare Company


 Perrigo strengthens business and financial profile with highly diversified revenue streams and enhanced cash flows

Perrigo Chairman and CEO, Joseph C. Papa

Perrigo Chairman and CEO, Joseph C. Papa

Perrigo Company and Elan Corporation, plc, a leading biotechnology company headquartered in Ireland, today announced that, following a formal sale process conducted by Elan, Perrigo and Elan have entered into a definitive agreement under which Elan will be acquired by a new holding company incorporated in Ireland (“New Perrigo”).

The cash and stock transaction, which is valued at approximately US$8.6 billion based on the closing price of Perrigo shares on 26 July 2013 (US$6.7 billion excluding Elan’s cash on hand), will create a global healthcare company with an industry-leading growth profile and the geographic scale and scope to continue building a truly differentiated business.

“Through this transaction, Perrigo establishes a diversified platform for further international expansion,” stated Perrigo Chairman and CEO, Joseph C. Papa. “We believe this transaction is compelling for Elan shareholders and fully takes into account the value of Elan’s assets, including a large cash balance and a double-digit royalty claim on Tysabri(R), a blockbuster product that generated revenues of US$1.6 billion last year and has been growing at a compound annual growth rate of 19%. We believe the combination of Perrigo and Elan will create an industry-leading global healthcare company with the balance sheet liquidity and operational structure to accelerate our growth and capitalize on international market opportunities.”

Mr. Robert A. Ingram, Chairman of Elan, commented, “This is an excellent transaction for Elan shareholders and provides them with cash consideration as well as the opportunity to benefit from the potential upside value of the new company. Joe Papa and his team have demonstrated exceptional capability and delivery of results in building a premier healthcare company over the past number of years. We have the confidence in Joe and his leadership team to continue to grow and expand its presence on a global scale.”

Additionally, Elan CEO Mr.

G. Kelly Martin, Elan CEO

G. Kelly Martin, Elan CEO

said, “The Elan platform has been constructed over the years to provide a unique and compelling investment thesis for our shareholders. This transaction underscores the tremendous value of Elan’s platform. The new combined company should deliver value, growth and diversification to shareholders for many years to come.”

The proposed transaction, which has been unanimously approved by the respective boards of directors of Perrigo and Elan, is expected to close by the end of calendar year 2013. At the close of the transaction, Perrigo and Elan will be combined under New Perrigo, a new company incorporated in Ireland, where Elan is incorporated today. New Perrigo, which is expected to be called Perrigo Company plc or a variant thereof, will be led by Perrigo’s current leadership team.

Elan’s current business portfolio includes royalties from Multiple Sclerosis (MS) treatment Tysabri(R) (marketed and distributed by Biogen Idec, Inc.), along with a neuropsychiatric pipeline with near term value-creating opportunities. Tysabri(R) had a 19% compound annual growth rate over the 2008-2012 period. Elan currently earns a 12% royalty on global net sales of Tysabri(R).From 1 May 2014 onwards, the royalty increases to 18% on annual net sales up to US$2.0 billion, and to 25% on annual net sales above this amount. The Tysabri(R) cash flows are highly sustainable with multiple barriers to entry, analogous to the fundamentals of Perrigo’s core business. Further upside exists if Tysabri(R) is approved for Secondary Progressive MS.

Key benefits of the transaction for Perrigo and Elan:

  •  Platform for International Expansion — Operating base in Ireland to serve as a business hub and gateway for expansion into international markets
  • Scale, resources and corporate structure to drive strategic initiatives and investments
  • Differentiated business model well-positioned to continue growth in core markets and to expand to other international markets
  • Strong Business and Financial Profile — Highly diversified revenue stream
  • Strong pro forma cash flows to continue to support an investment grade credit profile
  • Robust and sustainable growth outlook
  •  Financially Compelling — Enhances revenue, adjusted EBITDA and earnings growth rates and expands margins
  • Immediately accretive to Perrigo adjusted earnings per share in 2014
  • Meaningful synergy opportunities

Benefits to Elan Shareholders

  • Upfront value unlocked via the cash consideration, while Elan Shareholders will also have the opportunity to participate in the benefits of New Perrigo
  • Perrigo management team with strong track record of successfully acquiring and integrating diverse businesses

The combination is expected to result in more than US$150 million of recurring after-tax annual operating expense and tax savings. Certain of these synergies result from the elimination of redundant public company costs while optimizing back-office support and the global R&D functions. Additionally, tax savings are expected to arise from the combined company being incorporated in Ireland with organizational, operations and capitalization structures that will enable the combined company to more efficiently manage its global cash and treasury operations.

Mr. Papa concluded, “We are very impressed with the accomplishments of Elan’s leadership team. Over the past decades, they have built a company that delivers high quality healthcare products with a focus on innovations in science to fill significant unmet medical needs around the world. This strategic transaction aligns with Perrigo’s acquisition strategy and our previously-stated intentions to grow our international business. We expect New Perrigo to create tremendous value for our shareholders for years to come.”

Perrigo has secured an aggregate amount of US$4.35 billion in fully underwritten bridge financing commitments from Barclays and HSBC Bank USA, N.A., which, in addition to Perrigo cash on hand, are available to finance the cash portion of the transaction, pay fees and expenses related to the transaction and refinance Perrigo’s existing indebtedness including its current term loan, private placement notes and existing public bonds. Perrigo plans to refinance and repay the bridge borrowings through new debt issuances and the use of Elan cash on hand.

 

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