GSK Completes $13-Billion Buy of Novartis’ Stake in Consumer Healthcare JVBy
GlaxoSmithKline (GSK) has completed its acquisition of Novartis’ 36.5% stake in the companies’ consumer healthcare joint venture for $13 billion, which grants GSK full ownership of the business. The deal, which was announced in March 2018 was approved by shareholders on May 3, 2018.
The joint venture was formed in 2015 as part of Novartis’ portfolio transformation, which comprised a three-part inter-conditional transaction with GSK, including the combination of Novartis’ over-the-counter business with the GSK consumer healthcare business into the existing joint venture. Novartis also acquired certain oncology products and pipeline compounds from GSK and divested its non-influenza vaccines business to GSK.
Under the original transaction from 2015, Novartis had the right, exercisable from March 2, 2018 to March 2, 2035, to require GSK to purchase its stake (or specified tranches of it) in the joint venture. GSK said in April 2018 that this put option, in both size and possible timing, created inherent uncertainty for its capital planning and that its decision to buy out Novartis’ stake would remove this uncertainty and improve the company’s ability to plan allocation of capital to its other priorities.
In 2017, GSK’s consumer healthcare business reported sales of £7.8 billion ($10.9 billion). Since 2015, sales have grown 4% on a three-year compound annual growth rate (CAGR) basis (2015–2017 at 2014 constant exchange rates) with an overall improvement in operating margins from 11.3% in 2015 to 17.7% in 2017. At the time of the announced acquisition of the remaining stake in the consumer healthcare business, GSK said it expects the business’s operating margins to approach the mid-20’s percentages by 2022 at 2017 constant exchange rates.