Perrigo Co. (PRGO - Get Report) has agreed to sell its active pharmaceutical ingredients business to investment firm SK Capital LP for $110 million after launching a strategic review for the unit in February.
The API deal was one of two divestitures Perrigo announced on Tuesday, Aug. 10, as it unveiled its second-quarter results. The company, whose shareholders include activist investor Starboard Value LP, also said it has sold its Russia consumer healthcare international business. Terms of that deal and the identity of the buyer were not disclosed.
Shares of Perrigo were trading at $76.84 on Thursday afternoon, up 15.8%.
The transactions come on the heels of Perrigo's divestiture of its royalty stream for multiple sclerosis drug Tysabri to an affiliate of Royalty Pharma for up to $2.85 billion in a deal announced in February and completed in March.
In February, Perrigo settled with Starboard after the hedge fund sent a letter last September urging the company's management to "material changes," possibly including divesting a couple non-core assets.
The sale of the API business is expected to close in the fourth quarter. The unit develops and manufactures generic APIs and finished dose forms. Its operations are mainly in Israel with supporting functions in the U.S. and India.
As part of the deal, the companies have agreed to enter into a long-term supply pact for Perrigo API, which will be renamed prior to completion of the transaction, to supply multiple existing commercial and pipeline APIs to Perrigo.
New York-based SK Capital invests in the specialty materials, chemicals and pharmaceuticals sectors. Its portfolio companies in the API and FDF value chain include Noramco, Tasmanian Alkaloids and Halo Pharmaceutical.
RBC Capital Markets LLC and Rothschild served as financial advisers to SK Capital. Kirkland & Ellis LLP and Meitar Liquornik Geva Leshem Tal provided SK with legal counsel.
On an earnings call on Thursday, outgoing Perrigo CEO John Hendrickson said the API and Russia consumer healthcare transactions "exemplify the strategy of simplifying our core offerings and focusing on long-term value and profitability."
Perrigo reported second-quarter results that surpassed analysts' expectations. The company had adjusted diluted earnings per share of $1.22 on revenue of $1.24 billion.
Analysts had forecast, on average, non-GAAP EPS of $0.92 on sales of $1.18 billion, according to FactSet Research Systems Inc.
For full-year 2017, Perrigo said it now expects reported diluted EPS to be in the range of $0.84 to $1.09, compared to the previous range of $1.82 to $2.17.
The company raised its adjusted diluted EPS outlook to the range of $4.45 to $4.70 from previous guidance of $4.15 to $4.50, attributing the increase to "continued positive execution across all of our business segments."
Commenting on debt repayment, Hendrickson said on the call that with the completion of $2.2 billion of debt pay-down in the second quarter, the company has "created greater optionality and flexibility to use our strengthened balance sheet as evidenced by the repurchase of $58 million of shares in the second quarter."
Later on the call, an analyst asked whether Perrigo is starting to consider bolt-on acquisitions. Hendrickson, who in June announced plans to retire from Perrigo, responded that the company is open to enhancing its business platforms through bolt-on acquisitions, as well as using its balance sheet for other ways of returning capital potentially to shareholders.
-- Bill Meagher and Ron Orol contributed to this article
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