Forest Announces Major New Plans to Streamline Operations, Leverage Balance Sheet and Repurchase Common Stock
December 02 2013 - 8:30AM
Business Wire
Project Rejuvenate to Yield $500 million in
Cost Savings by End of FY2016
Company to Initiate $1 Billion Debt Offering of
8-Year Fixed Rate Notes
Board Authorizes $1 Billion Share Repurchase
Program
Company Repurchasing $400 Million of Common
Stock Through an Accelerated Share Repurchase Program
Forest Laboratories, Inc. (NYSE: FRX) today announced a series
of significant strategic actions to streamline operations and
reduce costs, leverage the Company’s balance sheet by issuing new
debt, and return cash to shareholders through a new share
repurchase authorization and an accelerated share repurchase
program.
“After an extensive review of Forest’s operations and strategy,
we are taking significant actions to make the Company more
competitive, enable future growth through acquisitions and return
cash to shareholders,” said Brent Saunders, Chief Executive Officer
and President. “With our portfolio of new products, talented people
and a long history of successful partnerships, we believe we are
well positioned for a bright future if we take actions quickly and
execute well. Furthermore, we believe the actions we are announcing
today put us on a path towards rejuvenating the Company. Our
objective is to drive long-term sustainable growth by focusing on
the things we do very well and increasing our relevance to our
stakeholders, including customers, colleagues, investors and
partners,” added Saunders.
Project Rejuvenate:
In order to streamline operations and reduce its operating cost
base, the Company has initiated Project Rejuvenate, which is
focused on three areas: flattening and broadening the organization
to reduce layers and increase span of control, enhancing
productivity and profitability by reprioritizing and rescaling the
cost base, and streamlining work to reduce low value activities.
The goals of Project Rejuvenate are to make Forest more nimble in
responding to a changing environment and to reduce operating
expenses by $500 million by the end of FY2016 relative to the
FY2014 cost base.
The Company expects to achieve 65%-75% of the cost savings from
Project Rejuvenate by the end of FY2015 and the remainder by the
end of FY2016. Approximately $270 million of the savings will
result from streamlining and realigning the research and
development organization, approximately $150 million of the savings
will be realized through a reduction of marketing expenses and the
remaining $80 million in expected cost savings will come from a
reduction in general, administrative and other expenses. The
Company currently estimates that approximately $110 million of the
$500 million in cost savings will be related to headcount savings.
The sales force and colleagues with key responsibility for
submission of important late-stage R&D programs are excluded
from Project Rejuvenate.
“Because our top priorities are maximizing the potential of our
launch brands and key products in our portfolio, as well as
delivering the late-stage pipeline, we have specifically
ring-fenced the sales force and colleagues with key
responsibilities for submission of certain late-stage R&D
programs from Project Rejuvenate to minimize disruption of these
critical growth-driving activities,” said Saunders.
Leveraging the balance sheet:
The Company also announced that it plans to issue $1 billion in
new long-term debt through an offering of 8-year senior unsecured
fixed rate notes. The net proceeds from the offering will be used
to fund share repurchases, bolt-on acquisitions and general
corporate purposes.
Increasing cash returned to shareholders:
Finally, the Board of Directors authorized the repurchase of up
to $1 billion of common stock. The Company will be entering into a
$400 million accelerated share repurchase program before the end of
the calendar year. Following the accelerated share repurchase, the
remaining $600 million available from the debt issuance will be
prioritized toward accretive merger, acquisition and licensing
opportunities. The Company has terminated the remaining repurchase
authority under its prior share repurchase program.
“Forest has a strong balance sheet with more than $3 billion in
cash and investments. By adding some leverage to the balance sheet,
we can take advantage of prevailing low interest rates, return
capital to shareholders and increase our ability to execute
accretive deals in the short term,” said Saunders.
Conference call details:
Forest executives will host a conference call with investors at
10:30 AM EST today to discuss the details of today’s strategic
announcements. The conference call will be webcast live on the
Company’s website at www.frx.com. Please log on to the website at
least fifteen minutes prior to the conference call as it may be
necessary to download software to access the call. A replay of the
conference call will be available until January 2, 2014 and also by
dialing (800) 839-2492 (US or Canada) or +1 (402) 220-7225
(international), Conference ID: FRX1202.
About Forest Laboratories and Its Products
Forest Laboratories (NYSE: FRX) is a leading, fully integrated,
specialty pharmaceutical company largely focused on the United
States market. The Company markets a portfolio of branded drug
products and develops new medicines to treat patients suffering
from diseases principally in five therapeutic areas: central
nervous system, cardiovascular, gastrointestinal, respiratory, and
anti-infective. Our strategy of acquiring product rights for
development and commercialization through licensing, collaborative
partnerships and targeted mergers and acquisitions allows us to
take advantage of attractive late-stage development and commercial
opportunities, thereby managing the risks inherent in drug
development. The Company is headquartered in New York, NY.
This release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
These statements involve a number of risks and uncertainties,
including the difficulty of predicting FDA approvals, the
acceptance and demand for new pharmaceutical products, the impact
of competitive products and pricing, the timely development and
launch of new products, and the risk factors listed from time to
time in Forest Laboratories’ Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q and any subsequent SEC filings. Forest assumes
no obligation to update forward-looking statements contained in
this release to reflect new information or future events or
developments.
This press release does not constitute an offer to sell or the
solicitation of an offer to buy the notes, nor shall it constitute
an offer, solicitation or sale in any jurisdiction in which, or to
any person to whom, such offer, solicitation or sale is unlawful.
Any offers of the notes will be made only by means of a private
offering memorandum.
Forest Laboratories, Inc.Frank J. Murdolo, 212-224-6714Vice
President - Investor Relationsmedia.relations@frx.com
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