Focus has increased on whether or not Perrigo Company could be pushed into a break-up situation with an ongoing strategic review
Soon after Reuters broke the news of potential sale of Tysabri royalties, RBC Capital analyst weighed in on Perrigo Company plc Ordinary Shares (NYSE:PRGO) and reaffirmed his $92 price target on the Sector Perform rated stock. The price target indicates 1.37% downside potential over the closing price of $93.28. RBC Capital analyst performed a breakup analysis and estimated a value of nearly $117 a share with a premium against modest dis-synergies.
Randall Stanicky, RBC Capital analyst noted investors’ focus has increased on whether or not Perrigo could push into a breakup situation given the ongoing strategic review. “Starboard has been pushing for the sale of non-core assets including the Tysabri royalties and Generics business and now Reuters is reporting that PRGO is exploring a sale of its Tysabri royalties. From here, the focus should be on management’s messaging around its willingness to sell the Generics business which will make a full break-up seem more likely,” said Mr. Stanicky.
Last week, Mr. Stanicky wrote in his research note to investors that the divestiture of royalties makes sense. He tagged Perrigo asset at approximately $2.8 billion. RBC Capital analyst figures Royalty Pharma as the most likely buyer of the asset. Mr. Stanicky expressed a possibility for 2017 earnings per share to increase from $6.47 to $8.04 if the company utilizes net proceeds from the sales to pay off its debt. Mr. Stanicky says the real question is whether Perrigo will obey another advice from Starboard, such as to sell-off generic business. If the company does so, full breakup would become more likely, he noted.
The Michigan-based pharmaceutical has a total market cap of $13.37 billion. Perrigo stock has a 52-week high price of $180.92 and a 52-week low price of $82.50. Out of the 21 analysts covering Perrigo stock, 15 rate it a Hold, four rate it a Buy, one rate it an Underweight, while one rate it a Sell.