Allegan, Mich.-based Perrigo, a global provider of healthcare products and Elan, a Dublin-based biotechnology company, 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 is valued at approximately $8.6 billion, based on the closing price of Perrigo shares on July 26. Net of cash, the transaction is valued at $6.7 billion.

Elan put itself up for sale in mid-June following a contentious four-month acquisition battle with Royalty Pharma. Royalty Pharma withdrew its $6.7 billion takeover offer June 18 after Elan shareholders voted in favor of a share buyback plan.

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

“Through this transaction, Perrigo establishes a diversified platform for further international expansion,” said 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, a blockbuster product that generated revenues of $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.”

Robert A. Ingram, chairman of Elan, said, “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.”

Elan CEO G. Kelly Martin 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.”

Elan’s current business portfolio includes royalties from multiple sclerosis treatment Tysabri (marketed and distributed by Biogen Idec), along with a neuropsychiatric pipeline with near term value-creating opportunities. Tysabri had a 19% compound annual growth rate from 2008 to 2012; Elan currently earns a 12% royalty on global net sales. Beginning May 1, 2014, the royalty increases to 18% on annual net sales up to $2 billion, and to 25% on annual net sales above that amount. The Tysabri cash flows are highly sustainable with multiple barriers to entry, analogous to the fundamentals of Perrigo’s core business. Further upside exists if Tysabri is approved for secondary progressive MS.

At the closing of the acquisition, Elan shareholders will receive $6.25 in cash and 0.07636 shares of New Perrigo for each Elan share. The transaction values each Elan share at $16.50, based on the closing price of Perrigo shares on July 26, 2013, which represents a premium of 10.5% compared to the closing price of Elan American Depositary Shares on July 26, 2013. Perrigo shareholders will receive one share of New Perrigo for each share of Perrigo that they own upon closing and $0.01 per share in cash.

Immediately after the closing, Perrigo shareholders are expected to own approximately 71% of the combined company, while Elan shareholders are expected to own approximately 29%. Shares of New Perrigo will be registered with the SEC and are expected to trade on the New York Stock Exchange and the Tel Aviv Stock Exchange.

Perrigo outlined a number of key benefits of the acquisition: Its operating base in Ireland will serve as a business hub and a gateway for expansion into international markets; the new company’s scale, resources and corporate structure will drive strategic initiatives and investments; and its differentiated business model is well-positioned to continue growth in core markets and to expand to other international markets. In addition, the companies point to a highly diversified revenue stream, strong pro forma cash flows support an investment grade credit profile and a robust and sustainable growth outlook. They also said the acquisition will enhance revenue, adjusted EBITDA and earnings growth rates, and expands margins.

The purchase will be immediately accretive to Perrigo adjusted earnings per share in 2014. The combination is expected to result in more than $150 million of recurring after-tax annual operating expense and tax savings, resulting from elimination of redundant public company costs while optimizing back-office support and the global R&D functions. Additionally, tax savings are expected 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.

“We are very impressed with the accomplishments of Elan’s leadership team,” said Papa. “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 $4.35 billion in bridge financing commitments which, in addition to Perrigo cash on hand, will finance the cash portion of the transaction, pay fees and expenses related to the transaction and refinance Perrigo’s existing indebtedness. Perrigo plans to refinance and repay the bridge borrowings through new debt issuances and the use of Elan cash on hand.

Launched as a packager of generic home remedies in 1887, Perrigo has grown to become a global provider of healthcare products. It develops, manufactures and distributes over-the-counter (OTC) and generic pharmaceuticals, infant formulas, nutritional products, animal health, dietary supplements and active pharmaceutical ingredients (API). The company’s primary markets include the U.S., Israel, Mexico, the U.K., India, China and Australia.

New Perrigo is a private limited company incorporated in Ireland solely for the purpose of effecting the Elan acquisition. New Perrigo will be converted, pursuant to the Irish Companies Acts 1963–2012, to a public limited company.