Perrigo Stock Spikes on Rumors of Mystery UK Company’s $20 Billion Acquisition Bid

June 15, 2016
By Mark Terry, BioSpace.com Breaking News Staff

Rumors that Dublin-based Perrigo Company was close to being bought by an unidentified UK company drove the stock up 9.2 percent to $108.13 yesterday.

Last year, Perrigo successfully fended off a hostile takeover bid by Canonsburg, Pennsylvania and UK-based Mylan N.V. (MYL). On Sept. 2015, Mylan made an official acquisition attempt, offering $27.3 billion. Under that offer, Perrigo shareholders would have received $75 in cash and 2.3 Mylan ordinary stock shares for each Perrigo ordinary share.

On Sept. 17, Perrigo’s board of directors unanimously unanimously rejected the offer. In efforts to fend off the bid, Perrigo consolidated its global supply chain, operations and procurement activities into a single global center of excellence in Ireland. It also made plans to streamline its organizational structure and cut redundant administrative functions. The efforts were expected to save $35 million annually.

Despite losing 60 percent of its market value, Perrigo executives were given substantial bonuses for successfully beating back Mylan. Joe Papa, the company’s chief executive officer, received extra restricted stock in December worth $1.5 million, as well as a $500,000 cash bonus.

On April 25, 2016, Papa left Perrigo to lead embattled Canadian firm, Valeant Pharmaceuticals (VRX). He was replaced at Perrigo by John Hendrickson.

Although the unnamed source of the rumors did not identify the acquiring company, the source did say Perrigo is being advised by Morgan Stanley and the mysterious UK company is being advised by several companies, including Barclays.

jumped a bit at the rumors, with a current share price of $108.13. That’s down significantly from its Aug. 17, 2015 trading price of $197.06. It’s been mostly a steady drop since then, trading for $147.68 on Oct. 22, 2015, for $128.66 on April 21, 2016, and dropping suddenly to $88.36 on May 13.

Wall Street analysts aren’t particularly enthusiastic about Perrigo stock, with a mean rating of 2.7 on a scale of 1 to 5. A score of 1 means “strong buy” and 5 means “strong sell.” Four analysts gave it a “buy” with two giving it an “outperform” and 12 giving it a “hold.”

“Among the 16 analysts Data provided by Thomson/First Call tracks, the 12-month average price target for PRGO is $121.75 but some analysts are projecting the price to go as high as $195,” wrote CWRU Observer. “If the optimistic analysts are correct, that represents a 97 percent upside potential from the recent closing price of $99.06. Some sell-side analysts, particularly the bearish ones, have called for $90 price targets on shares of Perrigo Company plc Ordinary Shares.”

On June 13, Jason Gerberry with Leerink wrote an analysis of Perrigo, writing, “Our sum-of-the-parts analysis suggests Perrigo should trade at $110 (or +11 percent above current price), but we view the odds of Perrigo splitting apart its three business units as low. … However, we believe the odds of Perrigo’s structuring such a deal are low, as Perrigo views the pharma business as core and synergistic with its consumer business … we believe another difficult quarter or two would likely escalate shareholder pressure to create value through restructuring options.”

Although the rumors of a sale are vague, the inside sources claim that the acquisition of Perrigo would run $20 billion, which is $7 billion below the Mylan offer.