Perrigo, the US drug maker, which has agreed to buy Elan, the faded Irish biotech star that in recent years had been reduced to a shell, has been partly motivated by the low Irish corporate tax rate that will provide a current saving of $150m, mainly from tax shopping, by locating a holding company in Dublin where the corporate tax rate ids 12.5% and there is no tax on patent income, but Ireland may gain little from the deal. The disposal of the remnants of the indigenous firm that was once the twentieth most valuable in the world, is a hammer-blow to Ireland's floundering knowledge / 'smart' economy project.
Perrigo, founded in 1887, produces private-label cold remedies, allergy treatments and infant formula for retailers including giants such Wal-Mart and Walgreen. It agreed to acquire Elan for $8.6bn (€6.5bn). The $16.50 price equates to a 10.5% premium over Elan's closing price last Friday and on Monday in Dublin, Elan shares rose 3.68% to €11.55 ($15.33).
The deal provides for $6.25 per share in cash and $10.25 per share in stock and Perrigo also gets Elan's $1.9bn in cash, royalties on the blockbuster Tysabri multiple sclerosis drug.
Last April. Elan sold its half stake in Tysabri to Biogen Idec, its US partner, for $3.25bn plus a royalty on sales, for the full rights to Tysabri. Tysabri has $1.6bn in annual sales currently. Royalties, now 12% and increasing to 18% next May, could surge to as much as 25% if the drug's sales exceed $2bn, Joseph Papa, Perrigo CEO, said.
Papa said by locating a holding company in Dublin, it expects to cut its tax rate from about 30% to about 17%.
In recent years, Ireland's GNP (gross national product) and current account balance have been boosted by large foreign companies with little or no activities in Ireland, establishing their headquarters there.
The combined company under Perrigo's name will list shares on the New York Stock Exchange and the Tel Aviv Stock Exchange, according to a statement.
Elan had $56.5m in revenue from continuing operations in H1 2013 while Perrigo had $3.2bn in revenue in fiscal year 2012.
We outlined In May how Elan, which was once Ireland's most valuable company had been reduced to a shell investment operation in recent years with les than 100 jobs in Ireland. In 2012 it began discussions with Royalty Pharma, which was founded in 1996 by Pablo Legorreta, a Mexican-born banker, who had worked at Lazard in its mergers and acquisitions division.
Bloomberg said Elan’s 2013 revenues will total about $204m, according to the average of four analyst estimates compiled by it.
The Sunday Independent has calculated that Kelly Martin would get €5m from a sale - - three times his salary and bonus as a lump sum on exit. Piled on to that are the proceeds of his various generous stock options, which tots up to a €47m total windfall.
Finfacts Update, Aug 2013: Irish Innovation: Evidence of science policy failure mounts
Finfacts: Irish Economy: Innovation, a failed enterprise policy and inconvenient facts for 2013
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