Perrigo Company plc PRGO
Perrigo lost half its value after rejecting Mylan's $205 bid; divesting Rx and Tysabri royalty, fixing BCH margins, and restoring credibility can re-rate the stock to consumer-staples peers.
Thesis
Starboard, a 4.6% shareholder, argues Perrigo is deeply undervalued after management and the Board rejected Mylan's $205 cash-and-stock offer in 2015 on promises of $9.83 EPS and $202–$210 fair value, then delivered successive guidance cuts to $7.00 EPS and a stock price of $89. Branded Consumer Healthcare operating margin has collapsed from 18.8% in 2014 to under 15% post-Omega acquisition, and the multiple has derated from consumer-staples parity (23.9x) to specialty-pharma territory (12.7x) — an 11x discount. Starboard calls for divesting the non-core Rx Pharmaceuticals business and Tysabri royalty, restoring BCH margins above prior peaks, retaining an investment bank to explore strategic alternatives, and demanding the new CEO, a 27-year Perrigo insider, articulate a concrete turnaround plan rather than incremental promises.
SCQA
Perrigo is a global OTC franchise with ~70% U.S. store-brand share, European branded leadership via Omega, a high-margin Rx Pharmaceuticals unit, and a lucrative Tysabri royalty — historically valued alongside consumer-staples peers.
Management rejected Mylan's $205 offer on aggressive standalone promises of $9.83 EPS and $200+ fair value, then mismanaged the Omega integration, missed guidance twice, and watched the multiple collapse to specialty-pharma levels.
Starboard demands portfolio changes — divesting Rx Pharmaceuticals and the Tysabri royalty — restoring BCH operating margins above prior peaks, engaging an outside investment bank, and a credible new strategic plan from the incoming CEO.
Closing the 11x P/E gap to consumer-staples peers, monetizing non-core assets, and restoring BCH profitability could move the stock well above the current $89 back toward the $200+ levels management itself once defended.
The three reasons
- 1
Perrigo lost 50%+ of value after rejecting Mylan's $205 bid on broken standalone promises
- 2
BCH operating margin collapsed from 18.8% to ~14.9% post-Omega — clear execution failure
- 3
Multiple derated from consumer-staples 23.9x to specialty-pharma 12.7x — an 11x discount
Primary demands
- Divest non-core Rx Pharmaceuticals business and Tysabri royalty
- Restore Branded Consumer Healthcare operating margins above prior peak levels
- Retain a reputable investment bank to evaluate strategic alternatives
- Articulate a concrete turnaround plan and demonstrate operational excellence
- Hold management and Board accountable for broken post-Mylan promises
KPIs cited
Pattern membership
Where this document fits across the library's 12 rhetorical / structural patterns.
Notable slides (4)
Notes
Classic activist letter structured around broken promises: Starboard weaponizes Perrigo's own October 2015 anti-Mylan deck (quoting its $202-$210 standalone target and Joe Papa's 'bigger, better, more valuable' line) against current management. Strong before/after framing with the $88.71 current vs $202-$210 promise side-by-side and the 132% gap. The peer-multiple derating chart (Perrigo falling from Consumer Staples 23.9x toward Specialty Pharma 8.6x) is the signature visual. No formal sum-of-parts valuation, but the letter clearly separates Core (CHC/BCH) from Non-Core (Rx Pharma, Tysabri royalty) as divestiture candidates. Signed by Jeff Smith; hostile-but-constructive tone framed as opening engagement. Addressed to newly-appointed CEO John Hendrickson (Papa departed April 2016).