After recently blowing past analyst expectations with its third-quarter results, Perrigo is feeling good enough to look toward some M&A, with its eye on the consumer health business that Germany’s Merck KGaA has put on the auction block.
That is at least what sources tell Reuters, which reports that Perrigo has put together a bid for the $4.7 billion unit just ahead of today’s deadline. Both Perrigo and Merck declined to comment but the news service says Perrigo figures Merck’s vitamins and supplements offerings, and its strength in emerging markets, work well with its own portfolio of generic and over-the-counter drugs, although other bigger players are also interested.
Perrigo CEO John Hendrickson, under pressure from activist hedge fund Starboard Value, has been cutting and trimming to get the company back on track after its share price fell off the cliff a couple of years ago when former CEO Joseph Papa turned down a buyout from Mylan. Perrigo cut 750 jobs earlier this year and has sold off its API business.
Those and other moves have paid off for the Allegan, Michigan-based company. Its generic sales results in the second quarter were better than most rivals', and it completely surprised analysts in the third quarter with earnings that allowed the company to raise its 2017 guidance. Its reported revenue of $1.22 billion, solidly above forecasts of $1.17 billion.
Those results aside, Perrigo will face some competition for the Merck unit, which had about $4.7 billion in sales last year. Merck had reportedly turned first to Nestle about a deal before deciding on an auction, Reuters reports. The packaged goods player is looking for a new direction to boost lagging sales.
Also, German generics maker Stada, which was recently bought out by private investors Bain and Cinven, is reported to be in the bidding, although it is a much smaller player than Perrigo.
The sale by Merck comes even as Pfizer also is looking to unload its much larger consumer health operations, a business that some believe could draw bids north of $20 billion. Merck has waved off any suggestion that poses a problem for its own deal, pointing out the two operations have very different portfolios that sell mostly in different markets and will draw a different level of bidder.