The over-the-counter market is expected to expand as more prescription drugs get moved to OTC status and retailers look for store brands that will compete. Two smaller players in the industry have decided to join their manufacturing and distribution forces to cash in on retailers' hunger for private-label products and position the expanded company as an alternative to OTC colossus Perrigo ($PRGO).
New York-based solid-dose player PL Developments said it will buy Aaron Industries, a liquid product specialist based in South Carolina. Both companies are private, and so terms of the deal, which may close yet this month, were not disclosed.
"PL Developments' preeminent position in the solid dose market segment, combined with Aaron Industries' strength in liquids and first aid products, allows us to provide greater product depth and choices for the growing needs of our retail partners and the consumer packaged goods industry," said PL Developments CEO Mitch Singer.
The compelling proposition to the deal, explained PL spokesman Rick Anderson, is that it offers a strong competitor to market-dominant Perrigo. "You are bringing together a very, very strong number two in solid dose products with a number one in the liquid dose products and the combined companies result in an emerging force."
Anderson said PL has built its expertise in packaging and distribution to meet the demanding just-in-time requirements of a long list of large-box retail chain customers like WalMart, Costco, Walgreen's, CVS, Target, Dollar General and others. "PL is much more advanced in manufacturing and distribution and that will really benefit Aaron. Together they will have more than 300 products and 3,000 SKUs."
PL has manufacturing and distribution facilities in Miami, FL, and Westbury, NY, where it is headquartered. Aaron has plants in Clinton, SC, where it is based, and in Los Angeles. PL will consolidate all of the administrative functions into its Westbury operations but keep all of the manufacturing. PL has about 660 employees and Aaron about 450. When the deal closes, there will be some layoffs because of overlaps in administration, but it will affect less than 5% of the workforce, Anderson said. The combined operation will still have more than 1,000 employees. It will also have sales of more than $400 million.
That makes the beefed-up player still small compared to Perrigo, the world's largest manufacturer of store-brand OTC products covering everything from cough and cold meds to diabetes products. It had more than $3.5 billion in sales in its last fiscal year, which closed July 31, and it is getting bigger. It is in the process of buying Ireland-based Elan ($ELN) in an $8.6 billion cash-and-stock deal that gets it Elan's low Irish tax rate and assets for expansion in Europe, but no products. Elan has lots of cash and a large royalty stream from having sold off the remaining rights to its multiple sclerosis drug Tysabri to partner Biogen Idec ($BIIB). Perrigo has also completed some smaller deals to expand into dermatology products and pet care.
- here's the announcement
OTC specialist Perrigo nabs Elan and its tax rate for $8.6B
Fast-growing generics maker Perrigo moves into pet care
Perrigo nails down dermatology spot with $45M deal
Sanofi's Nasacort OTC bid gets nod from FDA advisers