Perrigo Divests Mexico And Brazil OTC Units

Over-the-counter (OTC) health and wellness solutions provider Perrigo Company (PRGO) has agreed to sell its OTC units in Mexico and Brazil to Advent International.

Perrigo’s move is a part of its program to improve margins and streamline costs. It expects the transaction to close in H2 2021.

Perrigo CEO and President Murray S. Kessler said, “After a thorough review, we concluded Perrigo does not have sufficient scale in its Latin American businesses… As the path to improving margins in these regions would be further dilutive for the foreseeable future, the decision was made to exit these businesses.” (See Perrigo stock analysis on TipRanks)

Kessler added, “We are pleased to have reached an agreement with Advent and look forward to ensuring a seamless transition.”

The divested units generated $85 million in revenue in Fiscal 2020. Perrigo expects the divestment to be accretive to its margin percentage.

On May 11, Raymond James analyst Elliott Wilbur reiterated a Hold rating on the stock but did not assign any price target.  He is concerned about the sustainability of consumer demand trends for over-the-counter medications.

Commenting on Perrigo’s Q1 performance, Wilbur noted, “PRGO’s weaker-than-expected Q1 2021 results were negatively impacted by continued almost non-existent cough and cold season coupled with tough year-over-year comp due to the pandemic-related pantry load effect of Q1 2020.”

Consensus among analysts is that Perrigo is a Hold based on 1 Buy and 4 Holds. The average analyst price target of $52.75 implies 16.8% upside potential.

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