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Merger of global operations

GSK and Pfizer unveil £9.8bn healthcare joint venture


GlaxoSmithKline will have a majority stake in new venture


Drugs giants GlaxoSmithKline and Pfizer are to combine their consumer health businesses into a joint venture, with combined sales of approximately £9.8 billion ($12.7 billion).

GSK will have a majority controlling equity interest of 68% and Pfizer will have an equity interest of 32% and the combination will target £500 million in cost savings by 2022. 

The two companies say the proposed all-equity transaction represents a “compelling opportunity” to build on the recent buyout of Novartis’ stake in GSK Consumer Healthcare, to create a new world-leading consumer healthcare business and to deliver further significant shareholder value. GSK intends eventually to list GSK Consumer Healthcare on the stock market.

The proposed transaction supports GSK’s key priority of strengthening its pharmaceuticals business over the next few years by increasing cashflows and clear a path towards separation of GSK Consumer Healthcare to build further support for investment in its R&D pipeline. 

The new venture will be positioned to deliver stronger sales, cash flow and earnings growth driven by market leading brands, science-based innovation and substantial cost synergies.

It will bring together two portfolios of consumer health brands, including GSK’s Sensodyne, Voltaren and Panadol and Pfizer’s Advil, Centrum and Caltrate.

The JV will a major player in pain relief, respiratory, vitamin and mineral supplements, digestive health, skin health and therapeutic oral health. It will be the global leader in over-the-counter products with a market share of 7.3% ahead of its nearest competitor at 4.1% and have number 1 or 2 market share positions in all key geographies, including the US and China. 

The proposed transaction is expected to realise substantial cost synergies, with the Joint Venture expected to generate total annual cost savings of £500m by 2022 for expected total cash costs of £900m and non-cash charges of £300m.

Planned divestments targeting around £1 billion of net proceeds are expected to cover the cash costs of the integration. Up to 25% of the cost savings are intended to be reinvested in the business to support innovation and other growth opportunities. Overall the joint venture will target an adjusted operating margin percentage in the ‘mid-to-high 20’s’ by 2022.

GSK expects the proposed transaction to be accretive to total earnings in the second full year following closing, reflecting the impact and timing for the costs of integration; and to be accretive to adjusted earnings and free cashflow in the first full year after closing. 

It says the proposed transaction is transformational to the scale of GSK’s Consumer Healthcare business. Within three years of the deal closing, GSK intends to separate the joint venture via a demerger of its equity interest and a listing of GSK Consumer Healthcare on the UK equity market.

Over this period, GSK will substantially complete the integration and expects to make continued progress in strengthening its pharmaceuticals business and R&D pipeline.

Emma Walmsley, chief executive, GSK, said: “Through the combination of GSK and Pfizer’s consumer healthcare businesses we will create substantial further value for shareholders.”


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