Perrigo hands Starboard 5 boardroom seats, including one for the activist's CEO

Perrigo building
Perrigo will add five of activist investor Starboard Value's nominees to its board.

Perrigo and its activist investor have come to an agreement, and it’s one that’ll overhaul the company’s board.

On Tuesday, the Irish pharma announced that as part of an accord with the outspoken Starboard Value, it would be adding five of Starboard’s picks—including Starboard CEO Jeffrey Smith—to its board. Nestlé USA vet Bradley Alford and former Pfizer chief Jeff Kindler will also assume director spots, with two additional directors to be named later.

To make way, Herman Morris, Shlomo Yanai, Michael Jandernoa, and Gary Kunkle are stepping down from the Perrigo board, and Ellen Hoffing will do the same once Starboard lands the second of its recruits.

Chairman Laurie Brlas and CEO John Hendrickson “have been committed to bringing new energy and fresh perspectives to Perrigo” since they took up their posts in April of last year, Brlas said in a statement. “We are pleased to have reached this agreement with Starboard and look forward to working closely with the new directors to create value for our shareholders.”

The shakeup follows a September letter in which then-new shareholder Starboard slammed Perrigo’s “woeful” performance and urged the Dublin drugmaker to hive off its generic and specialty pharma products as well as its royalty interest in Biogen’s Tysabri.

“We believe the company could benefit from outside advice from a reputable investment bank or advisor on non-core asset divestitures or other broader strategic alternatives,” Smith wrote to Hendrickson.

While some analysts haven’t been too gung-ho about Starboard’s ideas—Perrigo’s core OTC business and its pharma segment are “heavily integrated” and a Tysabri divestment would take a toll on earnings, RBC Capital Markets’ Randall Stanicky wrote at the time—others don’t see a whole lot of hope for Perrigo in 2017. Last month, Jefferies’ David Steinberg lowered his full-year 2017 and 2018 revenue and EPS estimates, citing a potential delay to the launch of store brand OTC Nexium, pricing deterioration within Perrigo’s consumer health business, and less foot traffic at Perrigo’s retailers.

All things considered, putting up growth in 2017 “could prove quite challenging,” he wrote.

Meanwhile, the Perrigo pact isn’t Starboard’s only pharma board reshuffle in recent memory. Last October, it convinced California’s Depomed to add three Starboard nominees to its board and amend some company bylaws that Starboard deemed shareholder unfriendly.