GSK Buys Out Novartis’ Share of OTC Business

March 27, 2018

In a $13-billion transaction, GSK will purchase Novartis’ share of the Consumer Healthcare Joint Venture.

GlaxoSmithKline (GSK) announced on March 27, 2018 that it will buy out the 36.5% stake held by Novartis in the companies’ Consumer Healthcare Joint Venture for $13 billion. The joint venture, which included the combination of the Novartis Over-the-Counter business with the GSK consumer healthcare business, was approved by GSK shareholders in 2014.

Under terms of the original agreement, Novartis had the right to require GSK to purchase its stake (or specified tranches of it) in the joint venture. GSK reports that the agreement to buy out Novartis’ stake improves GSK’s ability to plan allocation of capital resources to other priorities, the company reported in a statement.

“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. 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,” said Emma Walmsley, chief executive officer, GSK in a press statement.

In a separate statement, Novartis reported that the sale will allow the company to focus on the development and growth of its core businesses.

"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. 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," said Vas Narasimhan, CEO of Novartis, in a company statement.

The transaction is subject to approval by GSK shareholders.

Sources: GlaxoSmithKlineNovartis