Perrigo Co. plc plans to sell its generic drug business to New York private investment firm Altaris Capital Partners LLC for $1.55 billion. The
Perrigo Co. plc plans to sell its generic drug business to New York private investment firm Altaris Capital Partners LLC for $1.55 billion.
The deal, which is expected to close in the third quarter, will complete a major re-configuration of Perrigo’s product portfolio that’s part of President and CEO Murray Kessler’s strategy to transform the company into a self-care company producing over-the-counter medications.
“The sale of our Generic Rx business is the most impactful step in Perrigo’s transformation plan. This transaction establishes Perrigo as a pure-play global consumer self-care company with industry leading fundamentals,” Kessler, who has agreed to a three-year contract extension, said in a statement. “At this point all of the commercial pieces of our transformation are in place and Perrigo is poised to create significant value.”
Under terms of the sale, Perrigo would receive $1.5 billion in cash from Altaris Capital, which also assumes $50 million in potential research and development milestone payments and contingent purchase obligations.
This deal provides Perrigo “increased financial predictability and flexibility,” Kessler said. Once the sales closes, Perrigo should have more than $2 billion in cash for its consumer self-care business to put toward “prudent and revenue accretive M&A,” he said.
“My goal is to put this money to work and re-build back the operating income through strategic M&A. That would be my first priority, and there are opportunities out there and we’ll evaluate them,” Kessler said in a conference call this morning to discuss quarterly results. “We will continue, just as we have in the past, to be extremely disciplined in our purchases. I’m not just going to run out and buy anything. My idea is to continue to build scale in the company, find targets that accelerate growth and make for a bright and strong future going forward.”
New York investment bank Centerview Partners serves as financial adviser and Wachtell, Lipton, Rosen & Katz is legal counsel to Perrigo on the transaction.
J.P. Morgan serves as lead financial adviser and lead left arranger while Goldman Sachs & Co. is financial adviser and arranger to Altaris Capital, which focuses investments solely on the health care industry.
Kessler called Altaris an “ideal owner to maximize the future potential of the Rx business.”
Perrigo’s generic prescription drug division generated $975 million in sales in 2020, about $165 million of which came from new products, with an adjusted gross profit of $400.1 million. The Rx division largely produces topical medications that include generic creams, foams, mousses, gels, liquids and inhalable products.
Perrigo announced the division’s sales Monday morning just prior to announcing $5.06 billion in sales for 2020 with a net loss of $162.6 million, or $1.19 per diluted share. Minus charges during the year, Perrigo recorded adjusted net income of $552 million, or $4.02 per diluted share.
The 2020 results compare to $4.83 billion in sales and net income of $146.1 million, or $1.07 per diluted share, in 2019.
Perrigo forecasts 3 percent organic sales growth in 2021 with a 5 percent increase in adjusted operating income.