GSK buys out Novartis in $13 billion consumer healthcare shake-up and takes full control of products such as Sensodyne toothpaste, Panadol, Headache, Muskelgel -Voltaren and Nicotinell- pavement.
GSK’s biggest step since the acquisition of Emma Walmsley last year, the decision of the British pharmaceutical company, the deal with Pfizer to sell, thereby endangering an auction of the American company took up to 20 billion of dollars.
Consumer drugs sold without a prescription have lower margins than prescription drugs, but brands are generally known to customers.
“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,” Walmsley said in a statement on Tuesday.
Although some pharmaceutical groups are willing to keep the products so that consumers have a more intense price competition online, led mainly by Amazon (AMZN.O), as well as cheaper brand products to that other place doubts about their returns stable in the long term.
Shares of the British company rose 6.1 percent, surpassing the STOXX Europe 600 Health Care .SXDP by 2 percent.
GSK said that not only will the Novartis project finish, but also launch a strategic review of Horlicks and other products for the consumers’ diet, which could lead to a possible new restructuring of the industry. The review includes an assessment of the majority stake in the list in India GlaxoSmithKline Consumer Healthcare.
“The decision not to pay up for Pfizer’s consumer assets will have led GSK CEO Emma Walmsley to remove uncertainty by bringing all the consumer revenues in-house and assisting toward efficient capital allocation,” said Ketan Patel, co-manager of the Amity UK Fund at EdenTree Investment Management, who holds GSK shares.
Long-term investors will welcome the greater clarity provided by these two companies.
GSK said the purchase would boost adjusted earnings and cash flows.
And the bidding by GSK for its consumer clinical nutrition brands – with a regional focus on India – could divert attention from Merck’s fortunes, which rely heavily on the sale of vitamins and nutritional supplements in emerging markets.
Novartis said the money will be used by Novartis to expand its business both organically and through acquisitions.
In an interview before the announcement of the operation Narasimhan ruled out large acquisitions of the Basel company.
According to the agreement, starting in 2014 to pool their consumption capacity, Novartis has the right to start its 36.5 percent stake this month, to Glaxo to sell. The transaction will be completed in the second quarter, subject to the necessary approvals.