Perrigo, which has its headquarters in Allegan, Mich., said the merger was predicted to erase $150 million in redundant operating costs.
The terms of the deal include a payment of $6.25 in cash for every Elan share plus 0.07636 shares of New Perrigo.
That would value each Elan share at $16.50, based on the closing price of Perrigo shares on July 26, the company said in a statement.
The prices is a 10.5 percent premium based on pricing after the July 26 close of markets.
The deal will result in a company, which will be based in Dublin, Ireland, the company said. It will be called New Perrigo "or a variant thereof," the companies said.
"We believe the combination of Perrigo and Elan will create and industry-leading global healthcare company," said Perrigo Chairman and Chief Executive Officer Joseph Papa.