Perrigo is exiting infant formula, with the Dublin-based company selling its assets to US contract manufacturer MeridianMade.
Under the terms of the deal, MeridianMade is paying $175m for the business, made up of a $40m cash payment and a performance-related $135m through 2030.
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New York-listed Perrigo said in a statement the divesture follows a strategic review of its infant-formula operations, concluding that a sale is the “best path forward for the business and its stakeholders”.
“This divestiture advances Perrigo’s evolution into a more focused consumer self-care company with a diversified portfolio of OTC products addressing essential, everyday health needs,” the company said.
Perrigo’s decision comes on the heels of an announcement from fellow healthcare group Abbott Laboratories, which is spinning off its infant formula and nutrition business into a standalone listed entity.
Meanwhile, London-listed Reckitt Benckiser remains in the long-running process of divesting its baby food powders business and the brand Mead Johnson.
Perrigo’s interim president and CEO Albert Manzone said today (29 October) the decision revolves around a three-point plan to “stabilise, streamline, and strengthen the business”.
He added: “For Perrigo, this transaction is expected to enhance our margin profile, materially reduce expected future capital expenditures, and enable us to concentrate resources on strengthening our core consumer self-care portfolio.
“We are confident that with its singular focus on infant nutrition and commitment to quality, safety, and continuity, MeridianMade is the right manufacturer to carry this important category forward.”
Subject to regulatory approvals, the transaction is expected to be completed in the first half of next year.
Infant formula will continue to be reported in Perrigo’s third-quarter results due on 4 November but will be classed a discontinued operations from the final three months of the year.
The company said it will incur a $275-$375m non-cash impairment charge in the fourth quarter related to the disposal, adding that infant formula generated sales for the group business of $380m in the previous 12 months and adjusted operating income of $8m.
According to MeridianMade’s LinkedIn page, the acquiring company operates three factories in the US in Reading, Pennsylvania, Allerton in Iowa, and Portland in Oregon.
Its CEO Ron Belldegrun said in the statement: “This acquisition is a commitment to responsible stewardship of store-brand infant formulas, which offer American families a more affordable option for safe, high-quality infant nutrition.
“We look forward to working with the Perrigo team throughout the transition and continuing to support this critical source of infant nutrition.”
Meanwhile, Perrigo claims to be the third largest manufacturer of infant formula in the US and Canada, having entered the category in 1998, according to its website.
The site adds that Perrigo also owns the US and Canadian rights to the Good Start infant-formula brand from Nestlé.
