GSK set to split after striking Pfizer deal
london — GlaxoSmithKline plans to split into two businesses — one for prescription drugs and vaccines, the other for over-the-counter products — after forming a new joint venture with Pfizer’s consumer health division.
The revamp is the boldest move yet by GSK CEO Emma Walmsley, who took over last year.
It will lead to the creation of a consumer health giant with a market share of 7.3 per cent, well ahead of its nearest rivals Johnson & Johnson, Bayer and Sanofi, all on around 4 per cent.
Walmsley has previously played down the idea of breaking up the group, something that a number of investors have called for over the years.
On Wednesday, however, she announced that GSK and Pfizer would combine their consumer health businesses in a joint venture with sales of £9.8 billion ($12.7 billion), 68 per cent owned by the British company, in an all-equity transaction.
GSK said the deal laid the foundation for the creation of two new UK-based global companies focused on pharma/vaccines and consumer healthcare within three years of the transaction closing.
For Pfizer, the deal resolves the issue of what to do with its consumer health division, which includes Advil painkillers and Centrum vitamins, after an abortive attempt to sell it outright earlier this year.
GSK, whose consumer products include Sensodyne toothpaste and Panadol painkillers, had withdrawn from that earlier Pfizer auction process but Walmsley said the opportunity to strike an all-equity deal cleared the way for the new agreement.
“It’s something we’ve been able to do quickly and quietly,” she told reporters in a conference call.
“What this deal is all about is the opportunity to strengthen two businesses — a world-leading consumer healthcare business and a new GSK that is focused on pharma and vaccines.”
Shareholders welcomed the news and the shares jumped 7 per cent, with Jefferies analysts saying the future separation could crystallise value.
The new joint venture with Pfizer is expected to generate total annual cost savings of £500 million by 2022 for expected total cash costs of £900 million and non-cash charges of £300 million. GSK plans divestments of some £1 billion. —