Dublin-based Perrigo could be up next for a tax-inversion deal

Perrigo CEO Joseph Papa

Perennial buyer Perrigo ($PRGO) may be changing its modus operandi. According to a report from the Israeli newspaper Globes, the OTC generics maker could be the next tax-advantaged company in line for a buyout. And while Perrigo hasn't confirmed any M&A plans, speculation has been enough to send shares soaring.

Perrigo has brought on an investment bank to consider a deal with a "major pharmaceutical firm," Globes reported earlier this week. Market sources tell the paper they think the pharma can score a 25% premium on its $20 billion market cap.

While Perrigo wouldn't respond to the rumors, Globes says, investors certainly did. Shares were up nearly 10% Monday, with trading volume far surpassing the company's three-month daily average, MLive reports.

CEO Joseph Papa told Globes in 2011 that Perrigo would continue on as a buyer rather than a seller, but current demand for tax-advantaged companies like his--which snagged Irish drugmaker Elan ($ELN) and its low rates for $8.6 billion last July--may have him thinking differently.

In the past couple of months alone, the promise of tax savings has spurred Pfizer's ($PFE) so-far-failed bid for British AstraZeneca ($AZN), as well as 5 AbbVie ($ABBV) bids for Dublin-based Shire ($SHPG)--the latest of which won endorsement from its board. On the med tech side, Medtronic ($MDT) struck a $42.9 billion deal in June for Covidien ($COV), also based in Dublin.

But as MLive notes, there are other reasons companies might be interested in snatching up Perrigo if it's on the block. In its deal for Elan, the drugmaker acquired a valuable royalty stream from the blockbuster multiple sclerosis med Tysabri, which Elan developed with Biogen Idec ($BIIB).

Perrigo is also the world's largest manufacturer of OTC drugs sold under major retailers' brand names. And while Irish companies may be hot, OTC products have stirred up their own share of demand among pharma players. Giants like Bayer--which recently snapped up Merck's ($MRK) OTC unit for $14.2 billion--have been looking to beef up their offerings in the space.

- see the Globes story
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