Glaxo plots foreign takeover bonanza
Drugs group eyes brands of German and US rivals
GLAXOSMITHKLINE could swoop on the consumer healthcare arms of US rival Pfizer and Germany’s Merck.
The British drug maker’s chief executive, Emma Walmsley, said it would consider the acquisitions as a way of ‘bulking up’ its consumer division which includes brands such as Panadol and Horlicks.
Pfizer’s consumer healthcare arm, which owns painkiller Advil, is thought to be worth £11.3bn while the Merck division behind Seven Seas cod liver oil tablets is valued at £3.4bn.
There are fears that a spending spree could eat into dividends, as well as its plans to refocus on its pharmaceutical division.
Any bid from Glaxo is likely to be met with fierce competition from rival suitors, with Durex and Cillit Bang owner Reckitt Benckiser also on the acquisition trail.
Walmsley said: ‘In terms of Pfizer or Merck, we would look at these assets and really look at them carefully in terms of their complementarity to our power brand strategy and our geographic footprint.’ She stressed it was still ‘extremely early’, with Pfizer yet to decide whether it would sell its consumer healthcare arm, and that Glaxo would prioritise its pharmaceuticals business.
But shares sank 5.5pc, or 83.5p, to 1429p, with some investors fearing it could lead to dividend cuts. Glaxo is just one company expected to be interested if Pfizer and Merck choose to sell. This month, Pfizer said it was considering a sale and Merck is mulling the fate of its operations. Both are expected to decide next year.
Glaxo’s consumer health products brought in £7.2bn in sales, including income from brands such as Voltaren and Sensodyne.
Walmsley, 48, is spearheading efforts to cut costs and concentrate on research into new drugs. Glaxo has lagged behind competitors in developing so-called ‘blockbusters’ and Walmsley has said its new strategy could include buying competitors or launching new partnerships. It is also mulling whether to buy the minority stake in its consumer health joint venture with Novartis, if its Swiss partner opts to sell next year – a cost that could be around £7.5bn.
Glaxo yesterday announced a 4pc rise in third-quarter sales.
It was helped by the failure of generic drug makers in the US to win approvals for copies of its lung inhaler Advair, as well as a sales boost for HIV drugs. It is preparing to launch a vaccine, Shingrix, for shingles in the US.