Relational Investors Shows New 8.71% Stake in Par Pharmaceutical Cos., Inc. (PRX), Says Board Should Consider a Sale If Discount Persists
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In a 13D filing on Par Pharmaceutical Cos., Inc. (NYSE: PRX), hedge fund Relational Investors disclosed a 8.71%, or 3,177,431 share, stake in the company. The firm did not hold shares at the end of the latest quarter ending September 30, 2011.
The firm said the shares are undervalued and said if the discount to the market persists the board should consider broad strategic alternatives (a sale).
From Item 4:
The Reporting Persons acquired the Shares covered by this Statement because, in their opinion, such Shares are undervalued by the market at the present time.
The Reporting Persons believe that several major factors have contributed to the Shares’ undervaluation and underperformance, including: (i) operating losses in the Strativa business, (ii) lack of visibility into the sustainability of the Company’s business model, and (iii) lack of a well-defined capital allocation discipline. The Reporting Persons believe these deficiencies have caused investors to discount management’s long-term plan.
The Reporting Persons are gaining confidence that actions taken by the Company’s management to right-size Strativa’s cost structure will improve the Company’s future earnings profile. Additionally, the Reporting Persons believe that the proposed acquisition of Edict, as well as the recent acquisitions of Anchen and three generic products from Teva Pharmaceuticals, position the Company to generate sustainable earnings growth beyond 2012.
On November 9, 2011 the Reporting Persons presented their views and concerns to the Company’s management team, including the Company’s CEO. At the time of this filing, the Reporting Persons believe management understands the factors contributing to the Shares’ undervaluation and is prepared to take action to improve the Company’s disclosure regarding the long-term growth prospects for the Company as well as the Company’s capital allocation discipline. The Reporting Persons believe that such disclosure and improved discipline will improve the Company’s valuation.
Despite these opportunities for improvement, the Reporting Persons believe that the Company may continue to trade at discounted prices because of industry challenges and the Company’s sub-optimal size and product scope. If the discount persists, the Reporting Persons believe that, in keeping with sound stewardship principles, the Company’s board will be required to consider broad strategic alternatives. Specifically, the Reporting Persons are confident that substantial cost savings could be achieved in a transaction with a strategic buyer. These synergies would flow from the scale benefits inherent in leveraging a single low-cost manufacturing, sales, and distribution network over the resulting larger asset base. The Reporting Persons believe these potential synergies would allow a strategic buyer to justify a premium price over recent trading value.
The Reporting Persons intend to closely monitor management’s progress toward improving the Company’s operations and disclosures and ultimately the share price. Depending on such progress (or lack thereof) the Reporting Persons may modify their plans.
The Reporting Persons and their representatives and advisers intend to continue from time to time to discuss the Company and its performance with members of the Company’s board and management. In addition, the Reporting Persons and their representatives and advisers may communicate with other shareholders, industry participants, and other interested parties concerning the Company. Although the Reporting Persons do not have any current plans other than the monitoring and communication program outlined above, the Reporting Persons may in the future exercise any and all of their respective
For more notable holders of Par Pharmaceutical Cos., Inc. stock click here. For more information on Relational Investors click here.
The firm said the shares are undervalued and said if the discount to the market persists the board should consider broad strategic alternatives (a sale).
From Item 4:
The Reporting Persons acquired the Shares covered by this Statement because, in their opinion, such Shares are undervalued by the market at the present time.
The Reporting Persons believe that several major factors have contributed to the Shares’ undervaluation and underperformance, including: (i) operating losses in the Strativa business, (ii) lack of visibility into the sustainability of the Company’s business model, and (iii) lack of a well-defined capital allocation discipline. The Reporting Persons believe these deficiencies have caused investors to discount management’s long-term plan.
The Reporting Persons are gaining confidence that actions taken by the Company’s management to right-size Strativa’s cost structure will improve the Company’s future earnings profile. Additionally, the Reporting Persons believe that the proposed acquisition of Edict, as well as the recent acquisitions of Anchen and three generic products from Teva Pharmaceuticals, position the Company to generate sustainable earnings growth beyond 2012.
On November 9, 2011 the Reporting Persons presented their views and concerns to the Company’s management team, including the Company’s CEO. At the time of this filing, the Reporting Persons believe management understands the factors contributing to the Shares’ undervaluation and is prepared to take action to improve the Company’s disclosure regarding the long-term growth prospects for the Company as well as the Company’s capital allocation discipline. The Reporting Persons believe that such disclosure and improved discipline will improve the Company’s valuation.
Despite these opportunities for improvement, the Reporting Persons believe that the Company may continue to trade at discounted prices because of industry challenges and the Company’s sub-optimal size and product scope. If the discount persists, the Reporting Persons believe that, in keeping with sound stewardship principles, the Company’s board will be required to consider broad strategic alternatives. Specifically, the Reporting Persons are confident that substantial cost savings could be achieved in a transaction with a strategic buyer. These synergies would flow from the scale benefits inherent in leveraging a single low-cost manufacturing, sales, and distribution network over the resulting larger asset base. The Reporting Persons believe these potential synergies would allow a strategic buyer to justify a premium price over recent trading value.
The Reporting Persons intend to closely monitor management’s progress toward improving the Company’s operations and disclosures and ultimately the share price. Depending on such progress (or lack thereof) the Reporting Persons may modify their plans.
The Reporting Persons and their representatives and advisers intend to continue from time to time to discuss the Company and its performance with members of the Company’s board and management. In addition, the Reporting Persons and their representatives and advisers may communicate with other shareholders, industry participants, and other interested parties concerning the Company. Although the Reporting Persons do not have any current plans other than the monitoring and communication program outlined above, the Reporting Persons may in the future exercise any and all of their respective
For more notable holders of Par Pharmaceutical Cos., Inc. stock click here. For more information on Relational Investors click here.
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