GSK plans break-up after £10bn Pfizer deal

Pearl Mccarthy
December 20, 2018

Pfizer - best known for Viagra and Anadin painkillers - would own the rest, though GSK added that the all-equity deal "lays the foundation" for it to spin off the healthcare arm - as shareholders had demanded of the company.

Walmsley, who was chief executive of GSK consumer healthcare before taking on the top job in April 2017, will chair the new joint venture until it is separated.

GlaxoSmithKline, one of the world's biggest drugs groups, is to be broken up after the company agreed to spin off its consumer healthcare business in a £10bn joint venture with USA rival Pfizer.

GSK said the merger was set to deliver cost savings of £500m by 2022, with a quarter of that sum to be reinvested in the business.

To achieve this, GSK intends to separate the JV as an independent company - within three years of closing the transaction - via a demerger of its equity interest to its shareholders and listing the firm on the United Kingdom equity market.

The revamp is the boldest move yet by GSK Chief Executive Emma Walmsley, who took over a year ago.

Pfizer's Nicorette stop smoking aid is displayed on a shelf at a Walgreens store
GlaxoSmithKline and Pfizer to merge healthcare divisions

It planned to create two separate UK-based companies - one focused on pharmaceuticals and vaccines and the other on consumer healthcare - within three years of completing its tie-up.

First Minister of Scotland Nicola Sturgeon (R) talks with GlaxoSmithKline's (GSK) new CEO Emma Walmsley as the First Minister pays a visit to officially open GSK's new production building on October 22, 2018 in Montrose, Scotland.

According to GSK, the JV "will be the global leader in over-the-counter (OTC) products with a market share of 7.3% ahead of its nearest competitor at 4.1%". GSK plans divestments of some 1 billion pounds.

George Salmon, equity analyst at Hargreaves Lansdown, said a specialist pharma group might be better able get results in the labs.

The boards of directors of both companies have unanimously approved the transaction under which Pfizer will contribute its consumer healthcare business to GlaxoSmithKline's existing consumer healthcare business.

"However, the potential to shift significant amounts of debt onto the cash generative consumer business should take the strain off the balance sheet, and thus buy valuable time for the pipeline to deliver".

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