Perrigo unloads US supplements business to contract manufacturer

By Hank Schultz

- Last updated on GMT

iStock photo.
iStock photo.
Perrigo has unloaded its US supplements business, with International Vitamin Corporation stepping up as buyer. The deal was seen by one observer as another step in the concentration of US-based supplement manufacturing backed by Chinese capital.

Perrigo, which is based in Dublin, Ireland, had been actively marketing the division since late 2015. Details of the deal were not immediately available, and efforts to contact officials at IVC were not successful.  According to information from a recent fourth quarter earnings call Perrigo executives conducted with analysts,  the division had contributed about $40 million in revenue during fiscal 2015.

Refocusing the company

At the time that the decision to sell the division was announced during the company’s third quarter earnings call in October, Perrigo was fighting off a hostile takeover bid from Mylan, a generic drug maker with roots in Pittsburgh, PA that reincorporated itself in 2014 in the UK. Mylan had been tendering unofficial takeover offers since April 2015, offers which Perrigo had rejected. It launched its formal, hostile takeover bid with an offer directly to Perrigo shareholders in mid September 2015, offering them $75 in cash and 2.3 Mylan shares for each Perrigo share. 

Since Perrigo, which manufactures a wide array of OTC products and pharmaceuticals, launched the plan to unload its vitamins, minerals and supplements (VMS) business, the company has swapped CEOs, too. According to a Forbes​ magazine report, under former CEO Joseph Papa, Perrigo spent $87 million to fend off the Mylan deal, which would have valued the overall company at about $28 billion. At current share prices, the company market cap today stands at about $14 billion. 

The company’s new CEO, John T. Hendrickson, had this to say about the VMS sale: “Our decision late last year to divest the U.S. VMS business was part of our ongoing portfolio assessment and ensures that we remain focused on our most profitable and strategic businesses. Having explored various options over the past several months, we are pleased to have reached an agreement to sell the business to IVC.”

Chinese capital backs deal

Scott Steinford, CEO of the CoQ10 Association and of NAXA, the Natural Algae Astaxanthin Association, said having the Perrigo assets come under IVC control continues the trend of increasing Chinese control of the US supplements industry. In addition to the hats he presently wears, Steinford has also acted as a business consultant within the industry and has deep connections in the Chinese market.  Steinford said a number of Chinese ingredient suppliers had come together to purchase IVC.

“If you look at the mass market contract manufacturing world, IVC has became a dominant player,”​ Steinford said.  

As with some other deals in the US market backed by Chinese capital, sorting out exactly who’s who becomes a bit murky. According to a 2013 report from a website called Chinese Daily USA​, Aland (Jiangsu) Nutraceutical Group, a private pharmaceutical maker from eastern China's Jiangsu province, had bought the assets that became International Vitamin Corp in 2010 for about $63 million. At the time of the report, IVC was said to be employing more than 400 people in New Jersey. The Perrigo VMS acquisition brings on board another 300 employees.

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