It was nearly two years ago that activist investors began urging Perrigo to hive off its specialty pharma unit. Now, it’s finally happening.
The Dublin drugmaker said Thursday that its board had OK’d a plan to split off the company’s prescription drugs business. It’s a move Perrigo’s directors think will allow the company to “focus on expanding its leading consumer business,” and all options are on the table, including a “tax-efficient separation to shareholders,” a sale or a merger.
The decision follows a strategic review from Perrigo’s board—and considering that board’s makeup, the decision to jettison the prescription business is no surprise. Last February, Perrigo forked over five spots on the company’s boardroom roster to activist Starboard Value, which began publicly lobbying for a split back in September 2016.
“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,” Starboard CEO Jeffrey Smith—who now holds one of Perrigo’s board seats—wrote in a letter at the time.
While the board may be gung-ho about the new plan, though, analysts aren’t so sure it’s the right way to go. “The company has been actively discussing this potential separation for some time and the lack of a buyer thus far to us suggests this won't be easy,” RBC Capital Markets’ Randall Stanicky wrote to clients, adding, “we do not think it is understood how dilutive this is likely to be.”
It’s been a rough two-plus years for Perrigo, featuring two CEO departures, the activist upheaval, layoffs, guidance cuts, a shareholder lawsuit and more. The situation didn’t look much better Thursday, with all three of the company’s units—prescription drugs, generics and OTC—missing consensus expectations.
The prescription segment in particular was hit hard, forcing the company to revise its sales expectations downward and adjust its earnings guidance, too.