While Perrigo Company (NYSE:PRGO; TASE:PRGO) is in advanced talks for the sale of its prescription drug activity for what is likely to be more than $2.5 billion, "Bloomberg" reported two weeks ago, workers at Perrigo's plant in Yeruham are worried about their future, and are considering declaring a labor dispute.
Most of Perrigo's business is in private brand over-the-counter (OTC) drugs, but over the years, the company has also produced generic prescription drugs. Last year, the company announced its intention of leaving this sector by selling or splitting off its prescription drug activity. The company said at the time that the measure would create value for its shareholders and enable it to focus on in business in the consumer market.
It was recently reported that two US private equity funds were in advanced negotiations to acquire this activity: Apollo Global Management and CVC Capital Partners. Perrigo previously said that it would complete its exit from the prescription drug sector in the second half of 2019.
As reported by "Globes" two months ago, the measure planned by Perrigo raises questions about the future of the company's plant in Yeruham, which is active in both prescription and OTC drugs. The plant is a new one inaugurated in 2016 at an investment of NIS 180 million and has 600 employees. Perrigo had operations in Yeruham before the plant was inaugurated, after acquiring Agis Industries, which has operated in the Negev town, since 2004.
Workers' committee petitions for an injunction against the sale
Sources inform "Globes" that the workers at the Perrigo plant in Yeruham, led by Haim Ben Abu, conducted negotiations with Perrigo's management. During these negotiations, the workers made demands concerning their job security following the impending sale. These demands included a two-year agreement following the expiration of the original agreement in 2020, including a yearly bonus clause; a commitment that the plant will be kept in Yeruham for five years; a NIS 3,500 bonus for each year of work for all of the workers at the plant, and a one-time NIS 1 million shekel bonus for the workers.
"I don't understand the reason for the delay in the negotiations. The demands of the workers' representatives are completely legitimate and realistic," the chairperson of the workers' committee wrote to management, emphasizing that the committee felt that a risk existed, and were utilizing all the means at their disposal.
Perrigo's management rejected the workers' demands. VP human resources Yossi Gal wrote to the workers' committee chairperson that management was retracting its earlier offers, and that it was disappointed at what it called the unrealistic demands, "in response to the company's generous offer made as a gesture of good will."
In view of management's response, the workers' committee called on the workers in Yeruham to boycott the planned toast ahead of the Passover holiday. The workers' committee contacted the Histadrut (General Federation of Labor in Israel) in preparation for declaring a labor dispute, and asked for an injunction against the sale. "We want to reach a compromise and ensure that we will have long-term economic security for several years. That is what matters to us," Ben Abu told "Globes."
Perrigo said today, "Since Perrigo made a strategic decision to consider splitting off or selling its prescription drug business, including all the activity in Israel and other centers in the US, the company's management in Israel has been conducting complete and fully transparent consultations with the workers' committee in the plant in Yeruham, accompanied by the Histadrut. Details were the process were provided regularly.
Management offered an extension of the existing collective labor agreement and a bonus
"In addition, negotiations were conducted in which the company agreed to extend the existing collective labor agreement for another significant period, and to pay a special sale bonus to all of Perrigo Israel's employees, even before a binding deal was reached. We will continue to behave fairly and with complete transparency towards the employees in the future. We emphasize that the activity in question is growing and profitable activity, in which Perrigo invested tens of millions of dollars. The plant and R&D center in Yeruham are still hiring dozens of workers a year."
Perrigo has several hundred employees in Israel, making it one of the largest employers in the Negev. 18 months ago, Perrigo completed the sale of another Negev plan - Chemagis, its active pharmaceutical ingredient division in Ramat Hovav - to US investment fund Sky Capital for $110 million. Two months ago, the Histadrut declared a labor dispute at the plant (now called Wavelength Pharma), due to allegations by the workers that their job security was being harmed, and that management was trying to weaken organized labor by layoffs.
Another large drug company, Teva Pharmaceutical Industries, recently sold a plant in the outlying areas, Migada in Kiryat Shmona. In preparation for the sale, Teva signed a collective labor agreement with the workers arranging their employment terms following the sale. FIMI Opportunity Funds acquired the Kiryat Shmona plant for $47.5 million.
Perrigo, managed by CEO Murray Kessler, has a $6.8 billion market cap, 74% below its peak exactly four years ago. The company's share price has climbed 31% this year.
Published by Globes, Israel business news - en.globes.co.il - on April 16, 2019
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