GSK plans demerger after unveiling new consumer joint venture with Pfizer

GlaxoSmithKline has laid the foundation for its own demerger after announcing Pfizer deal that will see the UK drug maker create two new global companies focused on pharmaceuticals and consumer healthcare.

GlaxoSmithKline Source: Bloomberg

GlaxoSmithKline (GSK) announced that it has reached an agreement with Pfizer to merge their consumer health units in a move that will create a world-leading business with combined sales of around £9.8 billion.

The deal will not only add significant value for GSK’s shareholders, but will also support the strengthening of its pharmaceuticals business in the coming years by increasing cashflows and laying the foundations for separating its consumer healthcare unit to support greater investment in research and development, the company said.

“Eighteen months ago, I set out clear priorities and a capital allocation framework for GSK to improve our long-term competitive performance and to strengthen our ability to bring new breakthrough medicines and better healthcare products to people around the world,’ GSK CEO Emma Walmsley said.

GSK-Pfizer consumer healthcare JV

The new joint venture will see GSK hold a majority shareholding of 68%, with Pfizer controlling the remaining 32%. The newly combined business will see GSK’s Sensodyne, Voltaren and Panadol brands joined by Pfizer’s Advil, Centrum and Caltrate.

The newly combined entity will become a global leader in over-the-counter products with a market share 7.3% ahead of its nearest competitor, with it holding the number one or two spots in terms of market share in all major countries, including the US and China, GSK said in a statement.

GSK's breakup plan

Within three years of completing the joint venture, GSK has said that it plans to breakup its consumer business via a demerger on the London Stock Exchange, effectively separating the business into two, with one focusing on consumer healthcare and the other on pharmaceuticals and vaccines.

‘Ultimately, our goal is to create two exceptional, UK-based global companies, with appropriate capital structures, that are each well positioned to deliver improving returns to shareholders and significant benefits to patients and consumers,’ Walmsley said.

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