GSK to Pay $13B for Novartis’ Stake in Consumer Healthcare JV

GlaxoSmithKline (GSK) has reached an agreement with Novartis for the buyout of Novartis’ 36.5% stake in their Consumer Healthcare Joint Venture for $13 billion. The Consumer Healthcare Joint Venture was formed as part of the three-part transaction between GSK and Novartis which was approved by shareholders in 2014. Last year, GSK’s Consumer Healthcare business reported sales of £7.8 billion and since 2015 sales have grown 4% on a 3 year CAGR basis.

Under the terms of the original transaction, Novartis has the right—exercisable from March 2, 2018 to March 2, 2035—to require GSK to purchase its stake (or specified tranches of it) in the joint venture.

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.

The majority of Horlicks and other nutrition products sales are generated in India, with the Horlicks range widely recognized as a portfolio of premium nutrition products. In India, these products are sold by GlaxoSmithKline Consumer Healthcare Ltd, a public company listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The strategic review will include an assessment of GSK’s 72.5% shareholding in the company.

GSK expects the outcome of the strategic review to be concluded around the end of 2018.

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.

“The proposed transaction addresses one of our key capital allocation priorities and will allow GSK shareholders to capture the full value of one of the world’s leading consumer healthcare businesses,” said Emma Walmsley, chief executive officer, GSK. “For the group, the transaction is expected to benefit adjusted earnings and cash flows, helping us accelerate efforts to improve performance. Most importantly it also removes uncertainty and allows us to plan use of our capital for other priorities, especially pharmaceuticals R&D.”