Perrigo Co. plc

The stable outlook reflects S&P Global Ratings' expectation that Perrigo will maintain adjusted leverage between 2x-3x in the long term (following the divestment of the prescription pharmaceutical segment), with the company balancing debt reduction, tuck-in asset acquisitions, and share repurchases to support those levels. We could lower the ratings over the next two years if Perrigo's financial policy becomes more aggressive, leading us to believe adjusted leverage will be sustained above 3x following the divestiture of the prescription pharmaceutical business. This could occur if Perrigo prioritizes investment, share repurchases, or acquisitions over debt reduction. We believe Perrigo has limited capacity for an acquisitions beyond tuck-ins (less than $500 million) given recent operating weakness and the uncertainty of the divestment of

...Perrigo has a dominant market share in the consumer self-care Americas (CSCA) segment but pricing pressure is intensifying. Perrigo has an estimated market share of up to 90% in certain categories of the U.S. private-label over-the-counter (OTC) and self-care products (e.g., infant formula and smoking cessation). We believe that Perrigo's largest retail chain customers have good negotiating power, causing an estimated low-single-digit decline in pricing and organic U.S. self-care revenue in 2019. We believe that Perrigo has to launch products with innovative characteristics (e.g., easier dosing methods) to support stable pricing. Perrigo is currently investing in R&D with the goal of launching private-label products that are better than the branded options. We believe volumes in U.S. private-label products should grow because Perrigo's retailer customers earn more on sales of private-label than branded. Perrigo's brand strength in consumer self-care international (CSCI) creates a stable...

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