Perrigo to Chop 800 Jobs, Buy Back Shares to Fend Off Mylan
October 22, 2015
By Mark Terry, BioSpace.com Breaking News Staff
Dublin, Ireland-based Perrigo Company plc announced today that it will take a number of actions, including layoffs, to increase profitability and help fend off a hostile takeover by Canonsburg, Penn. and UK-based Mylan N.V.
The company plans to consolidate its global supply chain, operations and procurement management activities into a single global center of excellence in Ireland. Perrigo projects annualized operational and tax savings of $105 million as a result.
It plans to streamline its organizational structure and slash redundant administrative functions, focusing on organic growth and global efficiency. The company hopes to save $35 million annually from these efforts.
Perrigo also plans to refine its portfolio, selling off its U.S. Vitamins, Minerals and Supplements (VMS) business, which it projects will save $35 million annually.
As a result of these changes, it plans to cut about 800 jobs, or about 6 percent of its global workforce.
“The actions we are announcing today are the next step in our strategy to leverage the powerful global platform we have built,” said Joseph Papa, chairman and chief executive officer of Perrigo, in a statement. “The acquisition of Elan Corporation in 2013 provided an international gateway for our durable base business model, and the purchase of Omega Pharma earlier this year provided us a pan-European branded consumer healthcare business that is delivering greater benefits than we originally expected. We are taking steps to ensure that we fully capture the benefits of our global platform to drive continued strong profit growth and build substantial shareholder value.”
On Sept. 14, 2015, Mylan officially announced a $27.3 billion buyout offer of Perrigo. Under that offer, Perrigo shareholders would get $75 in cash and 2.3 Mylan ordinary stock shares for each Perrigo ordinary share. Perrigo shareholders, as a result, would control 40 percent of the company.
Three days later, on Sept. 17, Perrigo’s board of directors unanimously rejected the offer. The company filed a Schedule 14D-9 with the U.S. Securities and Exchange Commission (SEC) and the Tel Aviv Stock Exchange (TASE) that explained their reasons for the rejection, as well as a letter to shareholders from Papa.
“Our Board of Directors has repeatedly rejected Mylan’s offer because it substantially undervalues our Company and does not adequately compensate shareholders for our exceptional standalone growth prospects,” the letter stated. “Our standalone strategy has rewarded Perrigo shareholders with a Total Shareholder Return of over 970 percent since 2007, which we have achieved through a balanced contribution of organic and inorganic growth…. Simply stated, Perrigo has an outstanding track record of value creation and our future is bright.”
In addition to today’s announced restructuring plans, Perrigo indicated it was initiating a $2 billion share repurchase plan. To be completed by the end of this year, it will include $500 million repurchases, and another $1.5 billion over the next two to three years. These purchases will be paid for with available cash, and is expected to add about $0.15 to the company’s 2016 adjusted earnings per share guidance.
“The actions we are announcing today to drive substantial profit growth make the gross inadequacy of Mylan’s offer clearer than ever,” Papa said in a statement. “We strongly believe that Mylan’s claims about synergies, benefits of its expected vertical integration and its ability to manage our business are simply wrong, particularly given the significant differences in our businesses and the markets in which we operate. It is fundamentally irrational to believe that Mylan can run this business better or more profitably than our team.”
Perrigo and Mylan operate in the generic drug market. However, Perrigo’s focus is cold and allergy drugs, and formula for babies. Mylan’s generic focus is its branded EpiPen allergy treatments.