Perrigo To Acquire Elan Corporation Capping Excellent Return Since Prothena Spinoff

By |
0 Comment
The long saga of Elan’s (ELN) corporate future seems to be coming to an end as the company agreed to an $8.6b takeover by drug company Perrigo (PRGO). The deal is a mix of cash and stock, with shareholders receiving $6.50 in cash and 0.07636 shares of New Perrigo for each share of Elan owned. Putting it all together, the deal values Elan at ~$16.50 per share which represents a modest premium to Friday’s close and slightly above Royalty Pharma’s unsolicited, hostile bid earlier this year.

The company has been the subject of takeover talk ever since the spinoff announcement of its drug discovery business, Prothena (PRTA), last year. The Inelegant Investor highlighted it as one of the reasons the parent company was an attractive investment. Shortly after the spin’s completion last December, Elan engaged in a lengthy and victorious public battle to ward off a hostile bid from Royalty Pharma, but the process ended with the company agreeing to put itself up for sale. While the company was still seeking to reinvent itself post-spin and post-Tysabri royalty deal, it does have some things going for it, such as steady cash flows and a favorable tax situation due to its Dublin domicile, that make it an attractive target.

Spinoff investors are surely happy with the results of this play as both the parent (~+50%) and the spin (~+110%) have delivered excellent returns. The deal is expected to close later this year and is now best left to those risk arbitrage specialists.

Disclosure: Author holds no position in any stock mentioned.

Related articles