GSK Buys Novartis Out of Their Consumer Health Joint Venture
In its biggest move since Emma Walmsley became chief executive last year, GSK announces that it will buy out the 36.5% stake held by Novartis in the companies’ Consumer Healthcare Joint Venture for $13 billion.
The move follows a global deal struck in April last year, under which Swiss-based Novartis AG had agreed with UK-based GlaxoSmithKline Plc to create a global consumer healthcare joint venture, GlaxoSmithKline Consumer Private Ltd (GSK CPL), as part of its global portfolio transformation.
“For the [GSK] Group, the transaction is expected to benefit adjusted earnings and cash flows, helping us accelerate efforts to improve performance,” Walmsley said. “Most importantly it also removes uncertainty and allows us to plan use of our capital for other priorities, especially pharmaceuticals R&D.”
“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,” said Novartis CEO Vas Narasimhan. “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.
”As a result of the transaction, GSK’s shareholders will capture the full value of GSK’s Consumer Healthcare growth. With category-leading Power Brands, increased focus on science-based innovation and improved operational efficiencies, GSK Consumer Healthcare is well positioned to deliver sales growth, operating margin improvements and attractive returns. The business expects operating margins to approach ‘mid-20’s’ percentages by 2022 at 2017 CER. GSK is initiating a strategic review of Horlicks and its other consumer healthcare nutrition products to support funding of the transaction, and to drive increased focus on OTC and Oral Health categories. Combined sales of these products were approximately £550 million in 2017.
India remains a priority market for GSK investment and growth. The Consumer Healthcare business will continue to invest in growth opportunities for its OTC and Oral Health brands, such as Sensodyne and Eno. The Group is also actively investing in its Pharmaceutical and Vaccines businesses, including building new manufacturing capacity in Vemgal, Karnataka and Nashik.
