The U.S. drug maker Perrigo Co (NYSE: PRGO) will buy Irish biotech company Elan Corporation (NYSE: ELN) for $8.6 billion, in a cash and stock deal, the companies announced on Monday, in a joint statement.

The Allegan, Mich.-based Perrigo, which manufactures over-the-counter and prescription drugs, and nutritional products, will pay $6.25 a share in cash and 0.07636 shares of New Perrigo -- the proposed new company combining Perrigo and Elan -- valued at $10, for each Elan share. The offer price is at a premium of about 10.5 percent over Elan’s closing price on Friday.

The deal is expected to help Perrigo save $150 million in taxes and operating expenses, as it will allow the company to move its headquarters to Ireland – where Elan is based -- which has a low corporate tax rate of 10.5 percent, compared to the 30 percent tax rate in the U.S.

“Certain of these synergies result from the elimination of redundant public company costs while optimizing back-office support and the global R&D functions. Additionally, tax savings are expected to arise 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,” Joseph C. Papa, Perrigo Chairman and CEO, said in a news release.

The deal also gives Perrigo access to revenues from Elan’s blockbuster Multiple Sclerosis drug Tysabri, which had a compounded annual growth rate of 19 percent in the 2008–2012 period, and raked $1.6 billion in revenues last year. Tysabri is marketed by Biogen Idec, which bought 50 percent rights in the drug from Elan for $3.25 billion in March.

“Elan currently earns a 12 percent royalty on global net sales of Tysabri. From 1 May 2014 onwards, the royalty increases to 18 percent on annual net sales up to US$2.0 billion, and to 25 percent on annual net sales above this amount,” the release said.

Earlier this summer, Dublin-based Elan had offered itself on sale after spurning a hostile bid worth $8 billion from New York-based Royalty Pharma AG. Competitors such as Allergan Inc. (NYSE:AGN) and Mylan Inc. (NASDAQ:MYL) were also reportedly in the race to acquire Elan.

“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,” Robert A. Ingram, Chairman of Elan said in the news release.

According to the release, the Perrigo-Elan deal is expected to be closed by the end of the calendar year after which a new Perrigo holding company called Perrigo Company plc, or its variant, will be incorporated to combine the two companies.

The new company will be led by Perrigo’s management team and, after the completion of the transaction, Perrigo shareholders will own 71 percent of the combined company while Elan's shareholders are expected to hold a 29 percent stake in the new company.

Perrigo has secured $4.35 billion in bridge-financing commitments from Barclays and HSBC Bank USA to finance the deal, according to the release.