Perrigo seen acquiring Merck division for $4.7b - report

John Hendrickson

Perrigo may have to compete against Nestle and German company Stada for the acquisition.

The Reuters news agency reported at the end of last week that Perrigo Company (NYSE:PRGO; TASE:PRGO) was one of the companies interested in acquired a division of German pharma company Merck KGaA. It was reported that Perrigo was likely to compete against Swiss company Nestle and German company Stada for the acquisition.

The Merck division up for sale deals in consumer health and sells over-the-counter (OTC) drugs, as well as vitamins and food supplements. The acquisition is likely to cost $4.7 billion. Reuters reported that Merck was looking for a buyer for its division, which has $1 billion in annual revenue. Perrigo had $776 million cash at the end of the third quarter, so it will need additional financing to acquire the division.

Perrigo is a generics drug company that is active mainly in the OTC and store brand sectors, and in complementary areas, and has a $12.2 billion market cap. In recent months, the company has been recovering from a difficult period, which included a retroactive correction of its past financial statements, huge one-time write-offs, and significant changes in management, while being under strong price pressure in its main market in the US. At the same time, activist US fund Starboard, which first invested in Perrigo 15 months ago, has been pushing for changes in the company, leading to the ousting of some of its directors and the appointment of directors selected by Starboard. Under pressure from Starboard, Perrigo has been focusing on its core business over the past year; for example, it has sold the Chemigas plant in Israel to US fund SK Capital for $110 million.

Perrigo is current managed by CEO John Hendrickson, who announced his resignation several months ago, and is in effect now a temporary CEO.

Perrigo has made no significant acquisitions in recent quarters; it has been focusing on internal streamlining. The company previously used acquisitions to expand into new markets, for example the acquisition of Irish company Elan for $8.6 billion in 2013 and Belgian company Omega for €3.8 billion in 2015, an acquisition that proved to be less successful than expected for Perrigo.

Perrigo also entered Israel through the acquisition of local pharmaceutical company Agis in 2005. Perrigo itself was a candidate for acquisition, when Mylan attempted a hostile takeover in 2015 and was rebuffed. Perrigo's share has since fallen 45%, but is up 2.6% since the beginning of the year.

Published by Globes [online], Israel Business News - www.globes-online.com - on December 18, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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John Hendrickson
John Hendrickson
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