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Investment firm calls for 'changes' at Perrigo

September 13, 2016
TAGS Perrigo
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Perrigo receives FDA approval for three new infant formulas
Perrigo’s infant-formula plants in Ohio and Vermont supply store-brand products across the globe. Courtesy Perrigo

An investment firm with a 4.6-percent ownership stake in Perrigo Company has sent a letter to the drug maker’s CEO, expressing displeasure with the company’s performance over the past year.

Jeffrey Smith, managing member at New York-based Starboard Value, addresses Perrigo CEO John Hendrickson and Perrigo’s Board of Directors in a letter released yesterday, where he states that he believes Perrigo (NYSE: PRGO) “is deeply undervalued” and “significant opportunities exist” to create value for shareholders.

“We believe changes are needed to reverse the trajectory of poor operating and financial performance and reposition Perrigo for future success,” Smith says.

He goes on to discuss the 2015 unsolicited proposal by rival drug maker Mylan, based in the Netherlands, to acquire Dublin-based Perrigo, which operates its North American base in Allegan, and Perrigo's staunch promise that a “stand-alone strategy would produce more value than the transaction.”

“In order to convince Perrigo shareholders to reject Mylan's offer, management and the board made aggressive promises of drastic improvements in both financial and stock price performance,” Smith says.

He says those promises have not been realized.

“Since that time, results have gone decidedly in the wrong direction, and management's promises have been woefully unfulfilled,” Smith says.

Smith points to Perrigo’s recent Omega Pharma acquisition, saying the company “severely mismanaged” the integration.

Smith says that despite Perrigo’s “missteps,” Starboard Value believes the company “has a strong franchise with valuable assets,” and the firm is encouraging Hendrickson and the board to focus on Perrigo’s “core businesses.”

Smith says Starboard Value intends to “immediately engage” with Hendrickson and the board “to understand how you plan to materially improve Perrigo's strategy and execution for the benefit of the company and all its shareholders.”

“Perrigo needs real improvements and not incremental promises,” Smith says.

Smith concludes the letter by saying, “Immediate and aggressive actions are required from management and the board.”

Perrigo issued the following statement yesterday in response to receiving Starboard Value’s letter:

“Perrigo will review the letter carefully and looks forward to a constructive and productive dialogue with Starboard — as we do with all of our shareholders — while we execute on a number of strategic and operational initiatives.

“Perrigo also reiterates its commitment to disciplined execution, transparency with its shareholders, customers and employees and, above all, to delivering value for its shareholders.” 

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