Starboard Value Takes 4.6% Stake in Perrigo -- Update
September 11 2016 - 11:11PM
Dow Jones News
By David Benoit and Jonathan D. Rockoff
Starboard Value LP has built a 4.6% stake in Perrigo Co., worth
nearly $600 million, and is urging the drug company to refocus on
its core business.
The activist shareholder sent Perrigo a letter Sunday
criticizing the company for failing to live up to performance
targets it set while successfully fending off a $26 billion
takeover offer last year from Mylan NV. A copy of the letter was
reviewed by The Wall Street Journal.
Starboard, fresh off victory at Yahoo Inc., argues Perrigo
management has been distracted by the merger fight and attempts to
diversify away from its over-the-counter drugs business, a
powerhouse in private-label medicines including versions of
headache remedy Tylenol, heartburn aid Pepcid and allergy pill
Claritin. Starboard argues the company should command a far higher
stock-market value but has lost investor confidence, according to
the letter.
Perrigo should consider shedding noncore assets, including its
prescription-pharmaceuticals unit and the lucrative income stream
it gets from multiple-sclerosis treatment Tysabri, Starboard
argues.
The hedge fund wants the company to hire advisers to explore
that and other alternatives.
Perrigo said in a statement that it would review the letter and
it "looks forward to a constructive and productive dialogue with
Starboard -- as we do with all of our shareholders -- while we
execute on a number of strategic and operational initiatives."
Last November, Perrigo managed to win the backing of its
investors in a hotly contested shareholder vote over what in
retrospect was a rich takeover offer from Mylan.
Perrigo's then-Chief Executive Joseph Papa argued the offer
substantially undervalued the company and its future prospects,
which he described as bright as the company took its
over-the-counter medicines abroad.
Yet Perrigo stumbled and shares have lost more than half their
value. Its market capitalization is now $12.7 billion.
The company has acknowledged difficulties integrating a European
business it had bought and counted on for growth. It has lowered
its financial outlook for this year, to $6.85 to $7.15 a share from
$9.50 to $10.10 in January.
In August, Perrigo reported second-quarter results that missed
Wall Street's expectations, which new CEO John Hendrickson blamed
largely on "competition and price erosion" for its generic
drugs.
In April, Mr. Papa left to take the helm of Valeant
Pharmaceuticals International Inc.
Starboard often seeks board changes and recently helped get
Yahoo sold.
Write to David Benoit at david.benoit@wsj.com and Jonathan D.
Rockoff at Jonathan.Rockoff@wsj.com
(END) Dow Jones Newswires
September 11, 2016 22:56 ET (02:56 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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