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GSK buys Novartis out of consumer health JV after ditching Pfizer bid

Will pay $13bn for the 36.5% stake owned by the Swiss drug maker

GSK

GlaxoSmithKline has agreed to take full ownership of its consumer healthcare joint venture with Swiss partner Novartis, shortly after deciding against a formal offer to buy Pfizer’s unit.

Under the terms of the deal, GSK will pay $13bn in cash for the 36.5% stake owned by Novartis giving it complete control of the JV and - according to the UK drugmaker - enabling GSK shareholders to “capture [the] full value of future performance”.

The UK firm has also said it is looking into a possible sale of its Horlicks brand and other nutritional products which together made sales of around £550m (about $780m) last year out of total consumer healthcare turnover of £7.8bn.

Novartis said the sale - an early move by recently-appointed chief executive Vas Narasimhan - will allow the company to focus on its core prescription drug business and make funding available for bolt-on acquisitions to grow its pipeline. The terms of the deal represent an “attractive price” for the stake, he said. Novartis has also said it intends to spin off its Alcon eyecare unit and the latest deal has added to speculation it may now consider parting with its 6% stake in Swiss rival Roche.

Novartis and GSK agreed to set up the JV as part of an asset-swap deal which also saw GSK’s cancer portfolio transferred to the Swiss firm in return for its vaccine assets. The latest move still has to be cleared by GSK shareholders.

GSK says that a key factor behind the decision is to remove uncertainty in its business. Under the original terms of the agreement, Novartis is able to require GSK to purchase its stake anytime up until March 2035 and taking full control “removes this uncertainty and improves the group’s ability to plan allocation of capital to its other priorities”.

The decision comes a week after GSK pulled out of an auction to buy Pfizer’s consumer health operations.

GSK chief executive Emma Walmsley - who formerly headed the company’s consumer health division - said the transaction “will allow GSK shareholders to capture the full value of one of the world’s leading consumer healthcare businesses”.

Article by
Phil Taylor

27th March 2018

From: Sales

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