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GSK plans break-up with Pfizer after $12.6 million deal


Both companies have merged their consumer healthcare portfolios to pave way for spin-off of drugs business

GlaxoSmithKline, one of the world’s biggest drugs groups is being broken up after the company agreed to spin off its consumer healthcare business in a $12.6bn joint venture with its US rival, Pfizer.

GSK, whose consumer brands include Sensodyne and Panadol, will have a controlling stake in the partnership of 68%, with Pfizer owning the remainder of the stake.

The FTSE 100 drugs maker stated that within three years of closing the deal—a move expected in the second half of 2019—it will demerge and float the consumer health business, and split GSK into two distinct businesses: one focused on the consumer, and the other on pharmaceuticals and vaccines.

Investors welcomed the news, with shares in GSK closing up nearly 4% at $19, making it the top riser on the FTSE 100 on Wednesday.

Emma Walmsley, the chief executive of GSK, called it a “landmark day” for the firm.

“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 stated.

She further emphasised that the deal with Pfizer was “transformational to the scale” of GSK’s consumer business that include: Anadin and ChapStick, and the merger with GSK’s division will create a business generating $12.5bn in annual sales.

Pfizer is best known as the manufacturer of the erectile dysfunction drug Viagra, which is not included in the tie-up.

The new combined entity will be a leader in pain relief, respiratory, vitamin and mineral supplements, digestive health, skin health and therapeutic oral health. It will also be a world leader in over-the-counter products, with a market share of 7.3% – ahead of its nearest competitor, Bayer, at 4.1% – and will have leading or second-place market share positions in key markets, including the US and China.

The new entity is scheduled to have headquarters in Brentford, west London, with a total of about 30,000 employees. GSK expects the tie-up to generate savings of $632mn by 2022. Walmsley stated that there could be “some impact” on jobs but added that the savings would not be made solely through job cuts. In other areas like procurement, GSK employes a total of 98,000 people around the world.

Walmsley said that over the long-term, the deal should be positive for jobs. “I hope, once we’ve gone beyond Brexit and into a more stable environment, that we’re able to be right at the heart of the UK’s life sciences strategy but also industrial strategy, and leverage the tremendous strengths that this country has. If you take a longer-term view, I believe we should be optimistic about the opportunities both for growth and employment that this deal today will create.”

Walmsley stated that GSK had a good track record of integrating businesses, citing the company’s buyout this yearof the remaining $13bn stake in its consumer healthcare joint venture with Novartis.

Ian Read, chairman and chief executive of Pfizer, said the two companies had a strong track record of “creating successful collaborations”.

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