GlaxoSmithKline has agreed to buy Novartis鈥� 36.5% stake in the companies鈥� consumer healthcare joint venture for $13bn.
British pharmaceutical giant GSK said in a statement that the deal would enable it to 鈥榗apture full value of future performance鈥�. Novartis said that moving forward it would focus on developing its core businesses, particularly prescription medication.
CEO of GSK Emma Walmsley said: 鈥淭he proposed transaction addresses one of our key capital allocation priorities and will allow GSK shareholders to capture the full value of one of the world鈥檚 leading consumer healthcare businesses. For the group, the transaction is expected to benefit adjusted earnings and cash flows, helping us accelerate efforts to improve performance. Most importantly it also removes uncertainty and allows us to plan use of our capital for other priorities, especially pharmaceuticals R&D.鈥�
The joint venture, which began in 2014, combined Novartis鈥� over-the-counter business with GSK鈥檚 consumer healthcare business. The joint venture includes products such as Horlicks drinks, Sensodyne toothpaste, Voltaren pain relief gel and Nicotinell nicotine patches. Last year, GSK鈥檚 consumer healthcare business reported sales of 拢7.8bn.
Novartis CEO Vas Narasimhan said: “While our consumer healthcare joint venture with GSK is progressing well, the time is right for Novartis to divest a non-core asset at an attractive price. This will strengthen our ability to allocate capital to grow our core businesses, drive shareholder returns, and execute value creating bolt-on acquisitions as we continue to build the leading medicines company, powered by digital and data.”
The transaction is subject to approval by GSK shareholders. It is expected to be completed in the second quarter of 2018. Proceeds in cash are expected to be received once all closing conditions are fulfilled.
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By GlobalDataShares in GSK rose by 4.9% following the announcement and Novartis rose by 2.1%. GSK expects operating margins to approach 鈥榤id-20s鈥� percentages by 2022.
The news follows GSK鈥檚 withdrawal from a $20bn contest to buy Pfizer鈥檚 consumer healthcare division.
