LONDON (Alliance News) - GlaxoSmithKline PLC said Tuesday it has signed a three-part inter-conditional transaction with Novartis AG which will see it sell off its Oncology portfolio, acquire Novartis' global Vaccines business, and create a dually-offered Consumer Healthcare business.
The transaction is designed to drive sustainable sales growth, improve long-term earnings and deliver increasing returns to shareholders, said Glaxo.
Within the terms of the deal, GSK and Novartis will create a new Consumer Healthcare business with 2013 pro forma revenues of GBP6.5 billion. GSK will have majority control with an equity interest of 63.5%.
The FTSE 100-listed healthcare giant will acquire Novartis? global Vaccines business (excluding influenza vaccines which Novartis is set to sell off separately) for an initial cash consideration of USD5.25 billion with subsequent potential milestone payments of up to USD1.8 billion and ongoing royalties.
GSK will also divest its marketed Oncology portfolio, related research and development activities and rights to its AKT inhibitor, and also grant of commercialisation partner rights for future oncology products, to Novartis for an aggregate cash consideration of USD16 billion (of which up to USD1.5 billion depends on the results of the COMBI-d trial).
Glaxo shareholders will receive GBP4 billion capital return funded by net cash transaction proceeds and expected to be delivered via a B share scheme, said the firm Tuesday.
The deal - which is set to complete during the first half of 2015 - is expected to be accretive to core EPS from the first year, reflecting execution of the intended B share scheme, said Glaxo. Thereafter, it is expected to record growing contributions from 2017 as projected cost savings and new growth opportunities are delivered.
Sir Andrew Witty, Chief Executive Officer, GSK, said ?Opportunities to build greater scale and combine high quality assets in Vaccines and Consumer Healthcare are scarce. With this transaction we will substantially strengthen two of our core businesses and create significant new options to increase value for shareholders.
?The Novartis OTC portfolio is highly complementary to GSK?s and has many well-known, widely recommended brands such as Voltaren, Excedrin, Otrivin, and Theraflu. Together, we will create the world?s premier OTC business with clear opportunities to accelerate revenue growth," he added.
The firm estimates that the transaction would increase GSK?s annual revenues by GBP1.3 billion to GBP26.9 billion, on a 2013 pro forma basis, and fundamentally re-shape GSK?s revenue base. These revenues would be split across Pharmaceuticals 62%, Consumer Healthcare 24% and Vaccines 14%.
Also announced today, Eli Lilly and Co. is set to acquire Novartis Animal Health for around USD5.4 billion in an all-cash transaction that will strengthen and diversify Lilly's own animal health business, Elanco.
When the acquisition is completed, Elanco will be the second-largest animal health company in terms of global revenue, will solidify its number two ranking in the US, and improve its position in Europe and the rest of the world.
By Alice Attwood; aliceattwood@alliancenews.com; @AliceAtAlliance
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Glaxosmithkline (GSK)