GlaxoSmithKline (GSK) has plans to spin off its Consumer Healthcare unit by demerging a minimum of 80% of the company’s 68% stake to its shareholders.
The demerger is scheduled to occur mid-next year. Before the separation, GSK is set to obtain a dividend of up to £8bn from Consumer Healthcare.
With a portfolio that recorded more than £10bn in annual sales last year, the new Consumer Healthcare company will have nine major brands and key sales positions in the US and China.
The Consumer Healthcare unit had two major deals in 2018, when GSK acquired Novartis’ 36.5% stake in its consumer healthcare joint venture (JV) followed by a merger with Pfizer’s consumer healthcare business into a JV.
GSK owns 68% holding in the JV while Pfizer owns 32%.
Following the latest spin off, GSK will retain up to 20% of its stake in the new Consumer Healthcare company as a short-term investment and will monetise it in the future.
Two new independent boards will be appointed for GSK and the demerged company. The separation is subject to shareholders’ approval.
GSK has also laid out goals and growth plans following the planned demerger.
GSK CEO Emma Walmsley said: “The benefits of the huge transformation we have driven since 2017 are now clear.
“With world class capabilities across prevention and treatment of disease, New GSK is exceptionally well positioned to positively impact people’s health and to deliver strong performance and value to shareholders through the decade.”
The company estimates more than 5% and 10% sales growth and adjusted operating profit growth, respectively, over the coming five years, at constant exchange rates. New vaccines and specialty medicines are expected to drive profit growth.
GSK also increased adjusted operating margin outlook from the mid-20% this year to more than 30% by 2026 and rose cost savings target from £800m to £1bn without any additional delivery costs.
The company has no plans for major restructuring after next year.
GSK is projected to generate sales of more than £33bn at constant exchange rates by 2031, driven by the commercialisation of the existing late-stage pipeline.
By 2026, the company’s operations are predicted to generate cash of more than £10bn.