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Novartis sells joint venture stake to GSK for $13 billion

March 27, 2018 19:46·
GSK has agreed to buy Novartis out of the companies' joint venture for £9bn

GSK has agreed to buy Novartis out of the companies' joint venture for £9bn

GSK also said it would initiate 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.

Investors appeared to welcome the decision, with the shares rising by as much as 7 per cent to a five-month high of £13.80.

Also, the deal will allow shareholders to capture the full value of GSK's Consumer Healthcare growth, the firm noted.

"While our consumer healthcare joint venture with GSK is progressing well, the time is right for Novartis to divest a non-core asset at a fair and attractive price", Novartis spokesperson Antonio Ligi told this publication. This review is going to include the assessment of its shareholding of the Indian subsidiary.

Pfizer has struggled in its attempt to sell its business of consumer healthcare since Reckitt Benckiser and GSK both pulled out of the bidding.

Consumer remedies sold over the counter have lower margins than prescription drugs, but they are typically well-known brands with customers. The pharmco explained that the proposed transaction addressed the group's stated key capital allocation priorities, supporting efforts to improve performance and capital planning. "Most importantly it also removes uncertainty and allows us to plan use of our capital for other priorities, especially pharmaceuticals [research]".

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Announcing the review, GSK said the majority of Horlicks sales were generated in India, where the drinks range was seen as a portfolio of premium nutrition products.

Her counterpart at Novartis, Vas Narasimhan, who rose to the top spot last month, said the over-the-counter business is no longer central to the Swiss company's strategy.

The transaction gives Glaxo full control of a business that sells Theraflu cold medicine and Panadol pain relievers, while arming Novartis with more firepower for its pharmaceutical operations and acquisitions. That leaves Novartis with its pharma division, biosimilars unit Sandoz and eyecare business Alcon.

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. LLC now owns 8,750 shares of the pharmaceutical company's stock worth $355,000 after acquiring an additional 1,500 shares during the last quarter.

GlaxoSmithKline plc (ADR) notes that it will need approval from regulators before it can complete the deal.

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