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By Ilene
Remember this? It was Monday. PRGO is down from around $130 to under $100 since I started following it LAST WEEK. That's down almost 25% in a week, and almost 50% in the last year. I commented:
"Perrigo CEO Joseph Papa leaves Perrigo (PRGO) to lead Valeant (VRX) while PRGO issues a warning about missing earnings expectations. Not surprisingly, PRGO stock plummeted today.
Robert Ingram, Chairman of the [Valeant] Board, stated, "The Board has conducted a thorough search process and believes that Joe is the ideal leader for Valeant at this time. He has a strong shareholder orientation, a background in science, and an unmatched track record of accomplishments, highlighted by his ability to lead companies through times of transition and drive excellence across commercial, manufacturing and R&D platforms. In addition, fostering an ethical culture and creating opportunities for professional development have always been high priorities for Joe, and we look forward to Joe's arrival at Valeant" (Valeant names Papa CEO after he resigns from Perrigo).
"Reuters reports that Mr. Shareholder Orientation became 'well-known on Wall Street last year when Dublin-based Perrigo rebuffed a $26 billion takeover by Mylan NV, the largest-ever hostile bid decided by a shareholder vote.' Perrigo's market cap has now dropped to around $14.2 billion [now $13.9 billion] — down over 18% today alone — making Papa look foolish for rejecting that buyout offer."
So after successfully (but not intelligently) fighting a $26 billion hostile takeover bid from Mylan, Perrigo reports disappointing quarterly results and it "slashes its outlook" (Perrigo shares tumble as CEO leaves for Valeant, guidance cut again). The stock has been in free fall and Papa is described as having a "strong shareholder orientation" and an "ethical culture."
While many were congratulating VRX for recruiting Papa to be its CEO, Jim Cramer wrote,
Perrigo's (PRGO) heartbreaking. How could Joe Papa, the man who was so intertwined with Perrigo for so long, the man who came on Mad Money and argued there was so much more value to the company than the price Mylan put on it — some 80 points higher than where it went out — just leave for Valeant (VRX)? How could he leave with a huge shortfall and some weird impairment charge about an acquisition that Papa crowed about, Omega, as a way to get international exposure?
There wasn't a single thing that was kosher about what I heard from this company today (Cramer: Papa's Got a Brand New Bag, and Leaves Perrigo Holding the Old One).
Answering the question as to why Papa would bail on PRGO to join VRX, leaving PRGO trading at half the value it could have been acquired for several months earlier, Linette Lopez at Business Insider reports,
While Valeant Pharmaceutical executives and hedge fund billionaire and company board member Bill Ackman were getting grilled by US Senators, the company dropped an important filing.
It turns out that the new CEO, Joe Papa, who starts on Monday, will make $67.5 million for leaving Perrigo for Valeant.
From Bloomberg: 'Papa, who is to take over the drugmaker next month, will get a $1.5 million salary, a target bonus of $2.25 million, and a special $8 million cash payment to compensate him for lost shares of Perrigo Co., which he ran until it was announced this week that he was taking over Valeant. In addition, he’ll get restricted stock and options worth $56 million. The value of the stock is based on Valeant’s April 27 closing price.'
So if you're wondering why someone would leave their CEO position at another firm to take one at a company that has seen its stock drop by almost 70% since October; that is being investigated by the House, the Senate, the SEC, and more; that has yet to file an annual report that was due in March — now you know.
The execs and Ackman were at the Senate to answer for Valeant's practice of purchasing drugs and jacking up their prices, rather than spending money on R&D. That issue, combined with accusations of malfeasance from a short seller, are what put Valeant in its current precarious position (Now we know why Valeant's new CEO took the job, and it seems politicians are upset about it).
From Reuters,
In addition to a salary of $1.5 million, Papa will receive 1.3 million restricted shares in the company, according to the Wall Street Journal report. If the stock reaches the threshold of $270 a share, Papa would receive stock worth more than $500 million (Valeant is making huge changes to its board).
And back to the Bloomberg article, Valeant Sets Incoming CEO Joe Papa's Pay at $67.4 Million:
Mike Pearson, Valeant’s outgoing CEO, will also be rewarded for his excellent work at Valeant.
"[Pearson] will get a salary of $2 million this year, and a target bonus of $4 million, which will be partly tied to his help in the leadership transition. The pay figures were disclosed in a regulatory filing on Wednesday," according to Bloomberg.
Piper Jaffray's David Amsellem (in video) recaps Papa's "carnage" at PRGO and asks, "Is this the best Valeant can do?"
You're probably wondering whether Mr. Shareholder Orientation negotiated a deal for the PRGO shareholders on his way out? Don't be silly. Of course he didn't.
