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Thursday, 22 October 2015 09:12

Perrigo’s profits-boosting plan shows ‘gross inadequacy’ of Mylan’s hostile takeover bid, executives say

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Company to sell business unit, streamline global operations, repurchase $2 billion in shares

ALLEGAN — Moving to fend off a hostile takeover bid by Mylan N.V., Perrigo Co. plc plans to get leaner.

The Dublin-based Perrigo, which maintains its headquarters in Allegan, said it was selling off the business unit for vitamins, minerals and supplements and streamlining its operations as part of a plan that includes cutting 6 percent of its workforce globally, or 800 jobs, and buying back $2 billion in shares.

John Hendrickson, the newly appointed president of Perrigo, said the actions are “the kinds of things” that Perrigo has done for years “to deliver value” to shareholders. Perrigo opted to publicly discuss the moves now as shareholders face a Nov. 13 deadline to decide whether to accept Mylan’s offer.

“It’s a continuation of the next step of becoming a stronger global company,” Hendrickson said. “It’s not new. We’re just getting the information out there so that people can understand the strategies we have and where we’re headed more fully to bake that into their valuation as they’re reviewing the Mylan offer.”

A “vast majority” of the jobs cuts will occur in South Carolina where the vitamins, minerals and supplements business is based, Henrickson said,

Hendrickson, a 26-year veteran of the company who most recently served as executive vice president of global operations and supply chain, heads Perrigo’s cost-cutting initiatives that involve consolidating supply chain and procurement management into a single global center based in Ireland “to maximize value through the elimination of redundancies and enhancement of purchasing power,” the company said.

The company announced that $500 million of the share repurchase will occur in the fourth quarter, boosting 2016 earnings by 15 cents per share. The remaining $1.5 billion in share repurchases will occur over the following 24 to 36 months.

Altogether, the actions announced this morning should generate $175 million in benefits to Perrigo, lifting earnings by 38 cents per share to $9.83 in 2016  and puting the company “in a better position to continue to expand our business” globally, Hendrickson said.

“And an expanded global business for Perrigo, is good business for Michigan,” he said, noting that Perrigo opened its first plant in Allegan in 1921. “As we open the next chapter in our history, continuing to expand our global presence, we are committed to continuing to be a strong Michigan company.”

A producer of over-the-counter medications and generic drugs, Perrigo employs about 4,000 people in Allegan and Holland – about 3,400 of them in Allegan – and ranks as the sixth-largest company in Michigan.

The moves come as Perrigo shareholders face a Nov. 13 deadline to decide whether to sell their shares to Mylan in a hostile takeover bid valued at $27.1 billion, or $75 in cash and 2.3 shares of Mylan stock for each Perrigo share.

The actions “to drive substantial profit growth make the gross inadequacy of Mylan’s offer clearer than ever,” Chairman and CEO Joe Papa said in a statement.

“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. With these actions, we are making a great company — with an outstanding track record of value creation and compelling prospects for continued growth — even better,” Papa said. “Perrigo is positioned to create substantially more value than the Mylan offer, and on behalf of the board, I urge all shareholders not to tender.”

Perrigo announced the actions as it reported third quarter sales of $1.34 billion and net income of $112.6 million.

Additionally, Michigan Gov. Rick Snyder weighed in on the hostile takeover and urged shareholders at Perrigo Co. plc to reject Mylan’s offer. 

In a Facebook posting, the Republican governor said he worries that a Mylan acquisition of Perrigo would lead to cuts of executive and professional staff, impact workers at manufacturing facilities “who become the casualty of these types of deal,” and have deeper spinoff effects.

“Perrigo supports a large supply chain consisting of businesses throughout Southwest Michigan that would be severely impacted if this bid to acquire the company is successful. Perrigo also supports numerous marketing and advertising firms and helps drive a major slice of the local and state economy,” Snyder wrote in his Facebook post.

“The bottom line is that a takeover of Perrigo could lead to devastating results for Allegan, become a serious blow to Southwest Michigan and a significant setback for the State. I view Michigan as a major stakeholder and I urge the Perrigo shareholders to vote no on this deal and affirm that Michigan is where Perrigo belongs.”

Perrigo, which is predominantly held by institutional investors outside of Michigan, pays about $2.4 million in state income taxes annually, $12 million in payroll taxes and approximately $3 million in local property taxes.

“I don’t want to see this revenue stream lost and I don’t want Michigan to lose the vital community support through Perrigo’s charitable work and vibrant community efforts,” Snyder wrote.

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Editor’s note: This story has been updated with comments from Perrigo President John Hendrickson and to add a statement from Michigan Gov. Rick Snyder. 

Read 1484 times Last modified on Monday, 26 October 2015 16:36
Mark Sanchez

Senior Writer

msanchez@mibiz.com

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