GSK reaches agreement with Novartis to acquire full ownership of Consumer Healthcare Business

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  • Agreement with Novartis to buyout Novartis’ 36.5% stake in the Consumer Healthcare Joint Venture for $13 billion (£9.2 billion) 
  • Proposed transaction addresses one of the Group’s stated key capital allocation priorities, supporting efforts to improve performance and capital planning for the Group  
  • 100% ownership of world-leading Consumer Healthcare business enables GSK shareholders to capture full value of future performance 
  • Consumer Healthcare business well positioned to deliver sales and earnings growth, driven by category-leading Power Brands, science-based innovation and improved efficiencies. Operating margins to approach ‘mid-20’s’ percentages by 2022 (at 2017 CER)  
  • Transaction expected to be accretive to adjusted earnings in 2018 and thereafter, and to strengthen cash flow generation  
  • GSK also to initiate strategic review of Horlicks and other consumer nutrition products to support transaction funding. Review will include an assessment of Group’s shareholding in Indian subsidiary, GlaxoSmithKline Consumer Healthcare Ltd


GlaxoSmithKline plc (LSE/NYSE: GSK) today announces that it has reached an agreement with Novartis for the buyout of Novartis’ 36.5% stake in their Consumer Healthcare Joint Venture for $13 billion (£9.2 billion). The Consumer Healthcare Joint Venture was formed as part of the three-part transaction between GSK and Novartis which was approved by shareholders in 2014. Last year, GSK’s Consumer Healthcare business reported sales of £7.8 billion and since 2015 sales have grown 4% on a 3 year CAGR basis (2015-2017 at 2014 CER) with an overall improvement in operating margins from 11.3% in 2015 to 17.7% in 2017. 

Under the terms of the original transaction, Novartis has the right, exercisable from 2 March 2018 to 2 March 2035 to require GSK to purchase its stake (or specified tranches of it) in the Joint Venture. This put option, in both size and possible timing, creates inherent uncertainty for the Group’s capital planning. The new agreement to buy-out Novartis’ stake removes this uncertainty and improves the Group’s ability to plan allocation of capital to its other priorities.

As a result of the transaction, GSK’s shareholders will capture the full value of GSK’s Consumer Healthcare growth. With category-leading Power Brands, increased focus on science-based innovation and improved operational efficiencies, GSK Consumer Healthcare is well positioned to deliver sales growth, operating margin improvements and attractive returns. The business expects operating margins to approach ‘mid-20’s’ percentages by 2022 at 2017 CER.

The transaction is expected to be accretive to adjusted earnings in 2018 and thereafter, and is expected to strengthen operational cash flows. Together with the Group’s new launch opportunities and expected operational improvements, these financial benefits further support GSK’s increased confidence in its ability to deliver its 2020 outlooks and invest effectively in the Group’s other priorities.

The transaction is subject to approval by GSK shareholders as Novartis is treated as a related party under UK Listing Rules, and the Board intends to unanimously recommend that shareholders vote in favour of the transaction. 

GSK is initiating a strategic review of Horlicks and its other consumer healthcare nutrition products to support funding of the transaction, and to drive increased focus on OTC and Oral Health categories. Combined sales of these products were approximately £550 million in 2017. 

The majority of Horlicks and other nutrition products sales are generated in India, with the Horlicks range widely recognised as a portfolio of premium nutrition products. In India, these products are sold by GlaxoSmithKline Consumer Healthcare Ltd, a public company listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The strategic review will include an assessment of GSK’s 72.5% shareholding in the company.

GSK expects the outcome of the strategic review to be concluded around the end of 2018. There can be no assurance that the review process will result in any transaction.

India remains a priority market for GSK investment and growth. The Consumer Healthcare business will continue to invest in growth opportunities for its OTC and Oral Health brands, such as Sensodyne and Eno. The Group is also actively investing in its Pharmaceutical and Vaccines businesses, including building new manufacturing capacity in Vemgal, Karnataka and Nashik.

Emma Walmsley, Chief Executive Officer, GSK said:

“The proposed transaction addresses one of our key capital allocation priorities and will allow GSK shareholders to capture the full value of one of the world’s leading Consumer Healthcare businesses. For the Group, the transaction is expected to benefit adjusted earnings and cash flows, helping us accelerate efforts to improve performance. Most importantly it also removes uncertainty and allows us to plan use of our capital for other priorities, especially pharmaceuticals R&D.”


A media teleconference will be held today at 10am BST:

UK Free Phone: 0808 234 7616

US Free Phone: 1 888 419 5570

International direct: +1 617 896 9871

Access Numbers:

Confirmation Code: 762 354 17


An analyst/investor teleconference will be held today at 2pm BST:

UK Free Phone: 0808 234 7616

US Free Phone: 1 877 415 3186

International direct: +1 857 244 7329 

Access Numbers:

Confirmation Code: 231 041 26 

A live audio webcast will begin at the same time as the teleconference. Participants can register for the webcast via

A presentation for analysts and investors will be available on GSK’s website: from 13:00 UK.

An archived version of the webcast will be available from the GSK website at approximately 19:00 UK, 14:00 US EDT on the same day.

Principal terms and conditions of the buyout

Structure and financing

The buyout will be structured as a cancellation of Novartis’ shares in the Joint Venture in consideration of the Joint Venture paying the buyout price to Novartis. GSK has entered into a committed facilities agreement to support funding of the buyout.

Valuation and financial information

The value of the Novartis put option was reported as £8.6 billion at 31 December 2017 representing an undiscounted value of £8.9 billion assuming completion of that option in mid-year 2018. The Board believes the negotiated value of $13 billion (£9.2 billion) is consistent with the methodology set out in the existing Joint Venture Shareholders’ Agreement.

At 31 December 2017, the value of the Joint Venture’s gross assets represented by Novartis’ stake was £5,859 million. In the financial year ended 31 December 2017, the share of the Joint Venture’s adjusted operating profit represented by Novartis’ stake was £494 million.

Conditions to completion

Novartis is treated as a related party of GSK for the purposes of the Listing Rules by virtue of its 36.5% interest in the Joint Venture and, as such, the buyout is conditional upon the approval of GSK’s shareholders at a general meeting. GSK has agreed that its Board will recommend that shareholders vote in favour of the resolution approving the buyout, subject to provisions that allow the recommendation to be withdrawn on account of fiduciary duties. The buyout is also conditional on there being no governmental orders restraining or prohibiting the buyout.

Break fee

GSK has agreed to pay a break fee of $200 million if (i) the GSK Board changes, withdraws or qualifies its recommendation (subject to repayment if shareholder approval is then still obtained within eight weeks of such change, withdrawal or qualification); (ii) shareholders vote on the buyout and do not approve it; or (iii) no vote is held on the buyout by 31 August 2018.

By virtue of Novartis being a related party of GSK under the Listing Rules, the break fee constitutes a smaller related party transaction within LR11.1.10R of the Listing Rules. GSK has obtained written confirmation from Citi, J.P. Morgan Cazenove and Greenhill that the terms of the break fee are fair and reasonable as far as GSK’s shareholders are concerned.

Termination of the agreement for the buyout

The agreement for the buyout may be terminated if (i) agreed in writing between the parties; (ii) if the break fee is paid (and, where applicable, there is then no subsequent shareholder vote approving the buyout within eight weeks); or (iii) if the buyout has not completed by 31 December 2018. If the agreement for the buyout is terminated, the Joint Venture shareholders’ agreement will continue to operate in accordance with its current terms.

Pre-completion dividends and post-completion true-up

The Joint Venture will continue to pay dividends to GSK and Novartis in accordance with its established practice until completion. The buyout is subject to a post-completion true-up which ensures that Novartis receives its agreed share of the Joint Venture’s profits for any period between the last regular dividend and completion of the buyout.

Expected timetable to completion

A circular setting out further details on the buyout, including the resolution seeking shareholder approval, will be sent to GSK shareholders in due course. Completion of the buyout is currently expected to occur during the summer of 2018.

Advice to the Board

The Board, which has been so advised by Citi, J.P. Morgan Cazenove and Greenhill, considers the terms of the buyout to be fair and reasonable and, to be in the best interests of shareholders. In providing their advice to the Board, Citi, J.P. Morgan Cazenove and Greenhill have taken into account the Board’s commercial assessment of the buyout.

Sources of information and bases of calculation

Unless otherwise stated, the financial information relating to GSK is extracted from the audited consolidated financial statements of GSK for the financial year to which it relates, prepared in accordance with IFRS.

Exchange rates of £1 = US$1.42 have been used, being the exchange rates at 4.30 London on 26 March 2018.

GSK – one of the world’s leading research-based pharmaceutical and healthcare companies – is committed to improving the quality of human life by enabling people to do more, feel better and live longer. For further information please visit about us.

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