Perrigo up for $20B sale to mystery U.K. buyer: report

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Ireland’s Perrigo may have a way out of its recent struggles.

The drugmaker is getting close to being snapped up for about $20 billion by a U.K.-based company, StreetInsider says, citing an unnamed source. The notion of a sale put shares on the rise Tuesday, and they climbed 9.2% to mark their largest single-day gain since last April. They continued their ascent Wednesday morning before falling more than 9% by Wednesday afternoon.

Some industry-watchers are skeptical of the rumored transaction, though, including Raymond James analyst Elliot Wilbur, who wrote in a Tuesday note to clients that "all we hear is noise."

A Perrigo spokeswoman declined to comment on the deal buzz.

Assuming there is a mystery Perrigo suitor, who could it be? The way Wilbur sees it, "there are few U.K. companies capable of pulling off such a transaction that would even come to mind as possible suitors, outside of perhaps GlaxoSmithKline or large consumer companies such as Reckitt Benckiser or even Unilever."

But Perrigo wouldn't exactly make a perfect match with any of those companies, he said. "We struggle to see the fit between a large-scale multinational pharma company focused on consumer assets with established brand equity and Perrigo's primarily U.S. private label," Wilbur wrote. Joining hands with a consumer powerhouse would be problematic too, he figures, noting that "Perrigo is essentially the anti-brand company from a consumer company’s perspective and how maintaining essentially a generic distribution arm to offset private label risk to branded franchises is worth the reported $20 billion purchase price escapes us."

A buyout could potentially help Perrigo, though, after a less-than-rosy last 12 months. Amid a months-long hostile takeover attempt by Mylan, it last October pledged to lay off 800 workers, consolidate its operations in Ireland, pare down its organizational structure and kick off a $2 billion share buyback plan. And while the moves may have fended off Mylan, so far, they haven’t been able to help the drugmaker deliver on its better-off-alone promises.

Part of the issue has been its 2015 buy Omega Pharma, which has gotten off to a start slow enough to drag down key OTC sales.

But some--including new skipper John Hendrickson--have pointed the finger at departed CEO Joseph Papa, who left in April to take the top post at embattled Valeant.

Perrigo’s “recent track record of performance against our own expectations is unacceptable,” Hendrickson told investors last month.

Meanwhile, the company has lowered its own expectations for its performance as it looks to turn things around. With the announcement of Papa’s exit, Perrigo also announced it would be slashing its full-year 2016 earnings guidance, taking it down to between $8.20 and $8.60 per diluted share from the $9.50 to $9.80 range it outlined in February.

- get more from StreetInsider (sub. req.)

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