UPDATE 1-Activist investor seeks strategic alternatives for Par Pharma

Fri Nov 25, 2011 4:55pm EST

* Relational Investors reports 8.71 pct stake in co as of Nov 14

* Says stock is undervalued

Nov 25 (Reuters) - Activist investor Ralph Whitworth's Relational Investors LLC fund announced a large stake in Par Pharmaceutical Cos Inc and said the generic drugmaker's management should consider strategic alternatives if the stock continues its poor run.

The San Diego-based fund, which reported an 8.71 percent stake in the company in a regulatory filing on Friday, said it believed the stock will continue to be undervalued "because of industry challenges and the company's sub-optimal size and product scope."

Woodcliff Lake, New Jersey-based Par Pharmaceutical's stock has lost about a quarter of its value so far this year. The shares closed at $29.01 on the New York Stock Exchange.

"The reporting persons (Relational Investors) are confident that substantial cost savings could be achieved in a transaction with a strategic buyer," the fund said in a filing with the U.S. Securities and Exchange Commission.

Still, the fund expects Par Pharma's recent deals to buy privately held generic drugmakers Anchen and Edict, along with its acquisition of three generic products from Teva Pharmaceuticals, to help the company generate sustainable earnings growth beyond 2012.

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