GSK and Pfizer to create consumer healthcare JV

GlaxoSmithKline and Pfizer have unveiled plans to combine their consumer health businesses into a new world-leading Joint Venture worth around £9.8 billion.

The deal will give GSK a majority controlling equity interest of 68% leaving Pfizer with a 32% stake, and will provide a "unique opportunity" to accelerate the UK drug giant's strategy whilst creating substantial value for shareholders, it said.

Within three years of closing the transaction, GSK intends to separate the JV via a demerger of its equity interest and a listing of GSK Consumer Healthcare on the UK equity market.

Over this period, GSK will substantially complete the integration and expects to make continued progress in strengthening its Pharmaceuticals business and R&D pipeline.

The intended separation of the group will allow the two resulting companies to be established with appropriate capital structures for their future investment needs and capital allocation priorities.

The new consumer healthcare company "with its more durable cash flows" will support higher leverage levels than the GSK group today, creating the opportunity on separation to reduce the leverage in the new Pharmaceuticals/Vaccines company, the firm noted.

"Through the combination of GSK and Pfizer’s consumer healthcare businesses we will create substantial further value for shareholders," said Emma Walmsley, GSK's chief executive, who will be chair of the new JV.

"At the same time, incremental cashflows and visibility of the intended separation will help support GSK’s future capital planning and further investment in our pharmaceuticals pipeline."

She continued, "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."

"Pfizer and GSK have an excellent track record of creating successful collaborations, and we look forward to working together again to unlock the potential of our combined consumer healthcare businesses", said Ian Read, chairman and current chief executive of Pfizer.

Pfizer said its transaction is expected to deliver $650 million in peak cost synergies and to be slightly accretive for Pfizer in each of the first three years after the close of the transaction.

The proposed transaction, which remains subject to approval by shareholders, is expected to close in the second half of 2019.

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