Perrigo Sells Generic Drug Unit to Altaris Capital for $1.55 Billion

Last year, state and local attorneys general sued Perrigo and other drug companies for artificially inflating the prices of 80 generic drugs.
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Perrigo  (PRGO) - Get Report shares rose Monday after the self-care products seller announced that it’s unloading its generic drugs unit to Altaris Capital Partners for $1.55 billion, including $1.5 billion in cash.

The unit has spelled trouble for Perrigo recently. Last year, 51 state and local attorneys general sued Perrigo and 25 other drug companies for conspiring to artificially inflate the prices of 80 topical generic drugs.

Perrigo stock recently traded at $42.52, up 5.4%. The gain came despite releasing weaker-than-expected earnings for the fourth quarter on Monday morning before the open.

As for the takeover, in addition to the cash, Altaris will assume more than $50 million in potential research and development milestone payments and contingent purchase obligations with third-party drug partners.

"The sale of our generic Rx business is the most impactful step in Perrigo's transformation plan,” Chief Executive Murray Kessler said in a statement.

He added that “this transaction establishes Perrigo as a pure-play global consumer self-care company with industry leading fundamentals. Perrigo Consumer Self-Care will have a focused portfolio with over $4 billion in revenues focused on the growing trends towards self-managed health and wellness.”

In addition, “after the transaction closes, Perrigo expects to have more than $2 billion in cash available to advance its consumer self-care strategy, preferably through prudent and revenue accretive M&A," Kessler said.

As for earnings, Perrigo posted adjusted profit of 93 cents a share in the fourth quarter, trailing the FactSet analyst consensus of $1. Revenue totaled $1.3 billion, down 2.5% from last year and slightly less than analysts’ forecast of $1.32 billion.

Decreased sales of cough and divested businesses hurt earnings.