GlaxoSmithKline CEO Emma Walmsley.
Photo: Sarel Jansen—Courtesy of GSK
By David Meyer
March 27, 2018

The British pharma giant GlaxoSmithKline has had a consumer health joint venture with Switzerland’s Novartis for the last few years. However, GSK has just struck a $13 billion deal with its partner to take control of the whole thing.

The joint venture sells products such as Nicotinell nicotine patches, Panadol headache tablets and Sensodyne toothpaste.

Just days ago, GSK seemed set to buy Pfizer’s consumer healthcare business. However, when it outbid rival Reckitt Benckiser and Reckitt pulled out of the Pfizer auction, GSK’s shares dipped, and the U.K. company ended up pulling out too.

At the time, GSK CEO Emma Walmsley said any opportunities must meet the company’s criteria for returns. On Tuesday, announcing the Novartis joint venture buyout, she said the proposed deal would “allow GSK shareholders to capture the full value of one of the world’s leading consumer healthcare businesses.”

Those GSK shareholders still need to approve the buyout before it can go through though.

GSK’s stock price rose 2% on news of the deal, while Novartis’s rose 1.1%.

“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.”

The uncertainty Walmsley is referring to stems from the fact that, under the terms of the joint venture’s formation, Novartis had the right to demand that GSK buys its stake at any point over the next 17 years. GSK now doesn’t need to keep money aside for that possibility.

“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.”

Novartis’s four appointees on the joint venture’s board will step down when the transaction closes.

Meanwhile, GSK said it would launch a review of its consumer healthcare nutrition products, such as Horlicks—a malted hot milk drink that’s particularly big in India—in order to help fund the joint venture buyout, and to focus its efforts on over-the-counter medicines and the oral health category.

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