During the quarter, Perrigo (NYSE:PRGO
) announced strong September quarter adjusted earnings growth of 20%. We say “adjusted” because the Company incurred what we believe are non-recurring charges related to the recent purchase of Elan Corporation, which is a branded-drug company domiciled in Ireland. Upon the closing of this purchase, Perrigo has “re-domiciled” itself in Ireland, with an effective tax rate meaningfully below what they were subjected to in the U.S. Given that the Company actively pursues a strategy of inorganic growth as much as it pursues organic growth - having acquired six new businesses over the past 18 months (including Elan) - we expect that this new tax structure should make future acquisitions, particularly those U.S. based businesses, much more attractive. Further, Perrigo’s core business, which includes private-label over-the-counter (OTC) pharmaceuticals and infant formula, drove much of the year-over-year growth. The Company’s unrivaled scale in manufacturing and marketing of store-branded offerings continues to enable retailers to mimic the value proposition of OTC pharmaceuticals and infant formula. This “store-brand conversion” is a multi-year trend that we expect will continue for the foreseeable future as consumers continue to become more value-conscious, yet more comfortable with store-brand quality that Perrigo helps engineer.
From David Rolfe
)’s Wedgewood Partners Fourth Quarter 2013 Commentary