Lower Irish Tax Rate Closes Perrigo/Elan Deal

Lower Irish Tax Rate Closes Perrigo/Elan Deal

July 31st, 2013 // 11:56 am @

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For the 2nd time in the last month, Ireland has shown up in the acquiring of one drug firm by another. The reason for this is very clear. Because the firm is locating the HQ in Ireland, the formerly US-based company will enjoy lower corporate taxes.

The most recent example is the $8 billion buy of Elan by Perrigo. This is after a deal in May where Actavis paid $9 billion for the company Warner Chilcott. Both times, the buyer benefits from the corporate tax rate of 12.5 percent in Ireland.

Also, Ireland offers treaties of double taxation with many other countries. So, the acquisition lets Perrigo cut its effective corp. tax rate to the high teens, rather than the 35 percent rate in the US.

Another big reason for the deal is that there is the chance to acquire the lucrative royalties from the multiple sclerosis medication Tysabri and an opportunity to increase the size of a portfolio that consists of OTC drugs and generics. Perrigo is going to be able to afford to purchase products at higher prices because the acquisitions are going to be occurring in lower tax jurisdictions.

However, Perrigo CEO Joe Pappa and members of their management team are planning to stay in Michigan and are not going to be moving to Ireland.

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