Perrigo Makes Moves to Fend off Mylan, Including Buybacks, Job Cuts
Friday, October 23, 2015
Perrigo Co. said Thursday that it would cut about 6% of its workforce, sell its vitamins business and repurchase up to $2 billion in shares as the generic drug company continues to fend off a takeover by Mylan NV.
“The actions we are announcing today to drive substantial profit growth make the gross inadequacy of Mylan’s offer clearer than ever,” said Chief Executive Joe Papa.
The Dublin-based company also said it promoted John Hendrickson to President effective immediately, and charged him with overseeing the measures unveiled Thursday.
Perrigo said it would reduce its head count by about 800 employees, or 6% of its workforce. The move is expected to result in $175 million in annualized run-rate benefits, the company said.
The company also said it is moving to refine its portfolio and putting its U.S. vitamins, minerals and supplements business up for sale. Perrigo said it is taking immediate steps to consolidate its operations, supply chain and procurement management activities into one global center in an attempt to reduce redundancies.
The buyback plan includes $500 million of repurchases that will be completed by the end of this year, with the remaining $1.5 billion to be completed over the subsequent two to three years. The initial $500 million in repurchases will add about 15 cents to earnings next year, the company said.
As such, Perrigo issued upbeat guidance for next year. The company sees $9.45 a share, well above the $8.92 a share analysts have projected and up from the $7.75 a share Perrigo expects to earn in 2015.
Mylan in April publicly bid for Perrigo, saying a combination would create a strong competitor in the quickly consolidating pharmaceuticals sector. Perrigo has rejected Mylan’s offers as too low.
Both companies are generic-drug makers, but they focus on different segments of the market. Perrigo makes cold and allergy medicines and infant formulas, including some sold under chain brands at Walgreens Boots Alliance Inc. and Wal-Mart Stores Inc.
Mylan, meanwhile, concentrates on generic drugs, but it is best known for its branded EpiPen allergic-reaction treatment, which may soon face pressure from potential competitors.
Perrigo shareholders would own about 40% of the combined company under the terms of the offer, which is set to expire Nov. 13.
wsj.com
