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GSK to acquire Novartis’ stake in consumer healthcare JV for $13bn

British drugmaker GlaxoSmithKline (GSK) has agreed to purchase Novartis’ 36.5% stake in its consumer healthcare joint venture (JV) for $13bn.

In 2015, the consumer healthcare JV was established, as part of a three-part inter-conditional transaction between GSK and Novartis.

The JV is a combination of Novartis' over-the-counter (OTC) business and consumer healthcare business of GSK.

As per terms of the original deal, Novartis has the right, exercisable from 2 March 2018 to 2 March 2035, to require GSK to purchase its interest in the JV.

The new deal to buy-out Novartis’ stake removes this option, helping GSK’s shareholders to capture the full value of consumer healthcare growth.

The deal is subject to approval by GSK shareholders, as Novartis is treated as a related party under UK Listing Rules.

GSK has started a strategic review of Horlicks and its other consumer healthcare nutrition products to gather funding for the transaction, and to increase focus on OTC and oral health categories.

Major portion of Horlicks and other nutrition products sales are generated in India, which are marketed by GlaxoSmithKline Consumer Healthcare in the country.

The strategic review, which will include an evaluation of GSK’s 72.5% shareholding in the company, is expected to be completed by the end of this year.

GSK CEO Emma Walmsley said: “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.”

Novartis CEO Vas Narasimhan said: "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.”

Image: GlaxoSmithKline head office, London. Photo: courtesy of Ian Wilson.