ALLEGAN — Perrigo Co. (Nasdaq: PRGO) announced that it has signed a definitive agreement to acquire substantially all of the assets of Sergeant’s Pet Care Products Inc., a privately held, Omaha, Neb.-based manufacturer of over-the-counter companion animal health care products, for approximately $285 million in cash.
Perrigo said it expects to receive a “significant” tax benefit as a result of the acquisition of Sergeant’s assets. The net present value of this tax benefit is estimated to be approximately $50 million. The acquisition is expected to close during the company’s fiscal 2013 second quarter pending the satisfaction of closing conditions, including regulatory approvals.
“This acquisition allows us to penetrate the pet care category by offering numerous flea and tick, health and well-being and consumable products to pet owners at affordable prices,” said Perrigo chairman and CEO Joseph C. Papa. “Sergeant’s has a proven record of innovation, high quality manufacturing with great customer service. We welcome Sergeant’s two hundred-plus employees and over one thousand SKU’s to the Perrigo family. This is a first step in executing on our strategy to expand our Consumer Healthcare portfolio into pet care, an adjacency of interest to our retail customers. We are excited to bring quality and value to consumers and their extended families.”
Perrigo said there were several benefits of the transaction.
Sergeant’s primary OTC channel flea and tick products contain the same active ingredients as the leading veterinary channel national brands, but offer consumers and retailers a compelling value proposition. In addition to regulatory hurdles (e.g., Environmental Protection Agency, Food and Drug Administration compliance), intellectual property portfolios, active-ingredient sourcing and channel access create barriers-to-entry.
Perrigo said the transaction is aligned with the company’s strategic growth objective to expand into adjacent categories where Perrigo can drive enhanced product offerings and value for its retail customers.
And, Perrigo said, the deal provides entry into a large and growing market — pet care is an $8-billion-a-year industry that has shown consistent growth through economic cycles. Consumers are treating their pets like members of the family and are spending a higher proportion of discretionary income on pet care and well-being.
The transaction is expected to be immediately accretive to adjusted earnings per share, by about 12 cents a share.
Pursuant to the terms of the agreement, Perrigo will acquire substantially all of the assets of Sergeant’s for $285 million in cash on a debt free basis. Perrigo intends to fund the transaction using cash on hand.
“We are very impressed with Sergeant’s strategic direction, growth and product offerings since its founding in 1868,” Papa said. “The team has built a company focused on bringing high quality, affordable pet care products quickly to market and the barriers to entry in this category are high. This strategic acquisition will expand our existing consumer healthcare business and add tremendous value for our shareholders for years to come.”
To listen in to a replay of a conference call discussing the transaction, call (800) 642-1687 in the United States or (706) 645-9291 elsewhere, using access code 30525127.
From its beginnings as a packager of generic home remedies in 1887, Allegan-based Perrigo Company has grown to become the world’s largest manufacturer of over-the-counter pharmaceutical products for the store brand market. Perrigo also develops, manufactures and distributes generic prescription (Rx) pharmaceuticals, infant formulas, nutritional products, dietary supplements and active pharmaceutical ingredients (API). The company’s primary markets and locations of logistics operations have evolved over the years to include the United States, Israel, Mexico, the United Kingdom, India, China and Australia.
More at www.perrigo.com.