Elan Corporation, plc (ADR) (ELN), Perrigo Company (PRGO): Examining an Acquisition That Benefits This Global Healthcare Supplier

In terms of valuation, Elan Corporation, plc (ADR) (NYSE:ELN) is valued at as much as 153 times its sales at $16.50 per share; this is a much higher valuation than Perrigo Company (NYSE:PRGO). Perrigo is trading at $128.40 per share, with a total market cap of around $12.1 billion. The market values Perrigo at around 3.5 times its sales. Biogen Idec Inc. (NASDAQ:BIIB) has a much higher valuation than Perrigo. At $227.80 per share, Biogen is worth $54.20 billion. The market values Biogen at more than 8.8 times its sales.

Interestingly, Elan Corporation, plc (ADR) (NYSE:ELN)’s first six month profits is much higher than its operating revenue. While its revenue from continuing operations were only $56.5 million, its profits came in at as much as $2.4 billion, including Tysabri’s payment.

My Foolish take

The Elan Corporation, plc (ADR) (NYSE:ELN) acquisition seems to be quite strategic for Perrigo Company (NYSE:PRGO). The U.S. company could effectively reduce its tax rate from around 30% to somewhere around the high teens as the Irish corporate tax rate is only around 12.5%. Moreover, it also benefits from Elan’s $1.9 billion in cash and consistent royalties on the Tysabri products. Last but not least, the acquisition allows Perrigo to expand the company’s footprint in Europe and diversify Perrigo’s business using Elan’s Irish domicile. Looking forward, Perrigo expects to deliver decent returns to their shareholders with Elan’s deal.

The article Examining an Acquisition That Benefits This Global Healthcare Supplier originally appeared on Fool.com.

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