GlaxoSmithKline is to buy out Novartis’ 36.5 per cent stake in its consumer healthcare joint venture for $13billion (£9.2billion), just days after walking away from a deal with US giant Pfizer.
The deal, which is expected to be completed in the summer, will see Glaxo will take full ownership of the division which makes Panadol and allow shareholders ‘to capture full value of future performance’, the drugs giant said.
To fund the acquisition, Glaxo said it was now considering putting its malted drinks brand Horlicks up for sale as well as other nutrition products.
Glaxo chief executive Emma Walmsley
It comes as last week, Glaxo abandoned plans to buy the consumer healthcare arm of rival Pfizer, which includes painkiller Advil and Chapstick lip balm.
New chief executive Emma Walmsley, which took the helm last year, said the deal agreed today would allow Glaxo to use capital for other priorities, in particular research and development of new drugs.
‘[…] The transaction is expected to benefit adjusted earnings and cash flows, helping us accelerate efforts to improve performance,’ she said.
‘Most importantly it also removes uncertainty and allows us to plan use of our capital for other priorities, especially pharmaceuticals R&D.’
Shares in Glaxo rose 4 per cent to 1,340.40p in morning trading.
Glaxo and Novartis joint venture was formed in 2015, but Swiss group Novartis said the deal was at an ‘attractive price’ and that this over-the-counter division was no longer central to its business.
Novartis chief executive 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.’
To fund the acquisition, Glaxo said it was now considering putting its brand Horlicks up for sale
Glaxo’s strategic review of Horlicks will also include an assessment of the company’s 72.5 per cent stake in its Indian subsidiary GlaxoSmithKline Consumer Healthcare.
Glaxo said over-the-counter and oral health products make sales of around £550million a year, with the bulk generated in India.