BY Richard Summerfield
Following years of investor pressure, and despite repeated refusals, GlaxoSmithKline (GSK) has announced plans to split its existing businesses in half, while forming a new joint venture with rival Pfizer’s consumer health division.
The joint venture will have a market share of 7.3 percent, well ahead of its nearest rivals Johnson & Johnson, Bayer and Sanofi, all of which have around a 4 percent share, and combined sales of approximately $12.7bn. The new venture will combine GSK’s Sensodyne, Voltaren and Panadol brands with Pfizer’s Advil, Centrum and Caltrate. GSK has confirmed that the Horlicks brand will not be included in the joint venture as it is being sold to Unilever.
GSK will have a majority controlling equity interest of 68 percent and Pfizer will have an equity interest of 32 percent, the firms confirmed in a statement. The merger will generate cost savings of £500m by 2022, according to GSK.
“Through the combination of GSK and Pfizer’s consumer healthcare businesses we will create substantial further value for shareholders,” said Emma Walmsley, chief executive of GSK. “At the same time, incremental cashflows and visibility of the intended separation will help support GSK’s future capital planning and further investment in our pharmaceuticals pipeline. With our future intention to separate, the transaction also presents a clear pathway forward for GSK to create a new global Pharmaceuticals/Vaccines company, with an R&D approach focused on science related to the immune system, use of genetics and advanced technologies, and a new world-leading Consumer Healthcare company.
“Ultimately, our goal is to create two exceptional, UK-based global companies, with appropriate capital structures, that are each well positioned to deliver improving returns to shareholders and significant benefits to patients and consumers,” she added.
Within three years of the joint venture closing, GSK has committed to demerging and floating its consumer health business, splitting the company into two distinct businesses: one focused on consumer, the other on pharmaceuticals and vaccines.
“We are pleased to announce this new joint venture for Pfizer Consumer Healthcare, delivering on our commitment to complete the strategic review for this business in 2018,” said Ian Read, chairman and current chief executive of Pfizer. “Pfizer and GSK have an excellent track record of creating successful collaborations, and we look forward to working together again to unlock the potential of our combined consumer healthcare businesses.”