John Park is co-portfolio manager of Oakseed Opportunity Fund and managing partner of Jackson Park Capital LLC
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P&G (PG) happy with Teva partnership; investor says acquisition is logical next step

Investor John Park to make Cincinnati visit

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CINCINNATI - An Israeli pharmaceutical company that launched a joint venture with Procter & Gamble Co. in 2011 would make a logical acquisition target for Cincinnati-based P&G, according to John Park, an investor in Teva Pharmaceutical Industries Ltd. and managing director of Jackson Park Capital in Utah.

Park will visit Cincinnati March 11 to hold a seminar for clients of THOR Investment Management Inc. A well-known stock picker who once managed the Columbia Acorn Select Fund, Park now serves as co-portfolio manager for the Oakseed Opportunity Fund . He is known for taking a contrarian approach and picking out-of-favor stocks that have growth potential.

"Most people who don't work in the field of investments assume that the thing that makes an investor good is risk aversion," he said. "I've tried to tell people that is not correct. The only way that you can really be successful is by knowing when to put on risk."

Park considers Teva a risk worth taking. The global pharmaceutical company lost nearly half of its market value in the last year because investors are worried about the loss of patent protection for an injectable drug to fight multiple sclerosis. A recent Bloomberg profile on the company's chairman said Teva might try to acquire smaller competitors.

But Park said the company has other prospects, including its joint venture with P&G. Celebrating its first anniversary on Nov. 1, the consumer health care partnership allows P&G to sell over-the-counter medications in global markets where Teva has long competed. The Geneva, Switzerland–based venture, PGT Heathcare , began with revenue of $1.3 billion, and is predicted to reach $4 billion by 2020.

Park's $35 million Oakseed fund owns about $1.4 million in Teva shares, partly because Park thinks it could become a takeover target.

"I would say that Teva has a possibility with any number of companies who might be interested in buying it for the various assets that it actually has," Park said. "P&G, being a current strategic partner, certainly seems to one that makes logical sense, if not the most logical sense. From a size perspective, it would be easy to digest. Market cap of Procter & Gamble is roughly $200 billion today. Teva is only about $28 to $30 billion. So, it's a little bit more than 10 percent of the size of P&G. They would have the ability to enhance their manufacturing, because that's what Teva is known as, a global manufacturer of pharmaceutical raw ingredients. Then, finally, they have a suite of not only generic but branded [products] which I know P&G has always tried to get into in a bigger way. So, it is possible. We don't buy companies on the sole tenet that it's an acquisition candidate, but it's one of the factors we look at in our analysis."

P&G declined to comment on Park's analysis, but spokesman Paul Fox said the partnership is "making solid progress" and is "on track" to reach sales objectives.

"The combined strengths of Teva and P&G are enabling us to accelerate our rate of global expansion and category growth with a good example being the launch of a full range of Vicks cough & cold products in Russia, Poland, Hungary and the Czech Republic," Fox said. "Another example is the use of P&G's marketing expertise to create a breakthrough campaign for Ratiopharm, the No. 1 OTC brand in Germany, acquired by Teva in 2010."

Fox also notes that P&G chose to exit the prescription pharmaceutical industry with the $3.1 billion sale of assets to Warner Chilcott in 2009.

Those wishing to explore the topic further can get into Park's seminar, entitled, "Risk is not a four-letter word." Space is limited, so seats must be reserved in advance at www.thorinvestment.com .

 

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