Perrigo Company, an Irish drugmaker specializing in over-the-counter and prescription pharmaceuticals, was sent a critical letter today from its largest shareholder, suggesting the “deeply undervalued” company explore selling off its prescription business and make other improvements to increase value.
Starboard Value LP of New York, which has approximately a 4.6 percent stake in Perrigo (PRGO
), called on the company's CEO John Hendrickson and the board to make changes needed to “reverse the trajectory of poor operating and financial performance” and most of those changes involved looking at how the company's prescription pharmaceuticals business – expected to generate about $1 billion of revenue in 2016 – “would be a valuable business to several strategic acquirers.”
“… 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,” read the letter.
Criticizing the company for blocking a buyout offer at $205 per share last year from drugmaker Mylan, Starboard went on to complain that Dublin-based Perrigo “severely mismanaged” integrating its branded consumer healthcare business, causing shares to lose more than half their value since the buyout.
Starboard determined the “core assets” of the company included its consumer healthcare business – the largest provider of store-brand OTC products in the U.S. – and its “significant manufacturing scale and breadth of distribution provide high barriers to entry.”
Perrigo, with a $12.7-billion market cap, was up around 6 percent in early trading following the news.