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Perrigo to sell 2 business units

August 12, 2017

Amid an ongoing organizational restructuring, Perrigo (PRGO) is selling off two of its business units as the company looks to streamline costs and pare down some of its debt.

On Thursday in its second quarter report, Perrigo said it was divesting itself of its pharmaceutical ingredients division, Perrigo API, to SK Capital for $110 million in cash. The Irish-based company also said it will sell off its Russia consumer healthcare businessThe Street reported. The company did not disclosed details, including the name of the buyer, about that particularly sale.

In a statement about its acquisition, private investment firm SK Capital’s Managing Director Aaron Davenport said Perrigo API is a “proven industry leader with strong innovation and manufacturing capabilities and a quality and customer-centric culture.”

As part of the deal with SK, both Perrigo and SK will enter into a long-term supply agreement for Perrigo API to supply multiple existing commercial and pipeline APIs to Perrigo. The deal is expected to close by the end of 2017. When the deal is finalized, a new name will be given to Perrigo API. Perrigo API is a leading developer and manufacturer of generic APIs with operations primarily located in Israel and supporting functions in the U.S. and India, according to company data.

Earlier this year, Perrigo initiated a strategic portfolio review that included the divesture of the company’s rights to the royalty stream of multiple sclerosis drug Tysabri. Perrigo sold the rights to RPI Finance Trust, an affiliate of Royalty Pharma, in a deal that could be worth up to $2.85 billion if sales goals are met through 2019. Perrigo acquired a share of royalty rights to Tysabri in 2013 as part of the acquisition of Elan Corporation (ELN). Biogen (BIIB) owns the marketing rights to Tysabri as part of its own deal with Elan. In addition to the sale of the two business units, Perrigo’s quarterly report was met with a highly positive response from investors. Shares of Perrigo shot up Thursday more than 12 percent, hitting $79.39. Perrigo’s earning beat analysts’ expectations on sales of $1.24 billion, which were higher than estimates of $1.18 billion. Shares fell back slightly during the day Thursday. This morning shares of Perrigo are trading at $76.84 as of 9:12 a.m. Perrigo is projecting 2017 net sales of $5 billion to $5.2 billion with earnings of $3.39 to $3.74 per diluted share.

“With such strong performance for the consumer business and a leadership transition underway, we expect Perrigo may further shift toward a consumer-driven business over time. With substantial opportunity ahead: 1) new leadership coming soon; 2) a board focused on delivering shareholder return; and 3) a potential strategic shift to fully embrace Perrigo’s consumer roots we see significant opportunity in PRGO shares and reiterate our BUY rating,” Dewey Steadman, an analyst with Canaccord Genuity said in a note sent to BioSpace.

Earlier this year, the company projected a preliminary loss for 2016 and also said it was initiating a plan to streamline its organizational structure to save $130 million by mid-2018. Perrigo’s new strategic game plan was spurred by activist investor Starboard Value, which controls about 6.7 percent of company shares. Starboard has been critical of Perrigo leadership for some time. In September, Starboard sent the company a letter criticizing “operational and financial missteps’’ in the wake of Perrigo’s 2015 decision to spurn Mylan (MYL)’s takeover bid.


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