GSK to buy Novartis’ stake in Consumer Healthcare Business for $13 Billion

GlaxoSmithKline plc (NYSE: GSK) announced on Tuesday its agreement to buyoutNovartis AG’s (NYSE: NVS) stake in their Consumer Healthcare Joint Venture for 9.2 billion euros or $13 billion. Novartis holds a 36.5 stake in the joint venture.

The Consumer Healthcare Joint Venture was formed as a transaction between GSK and Novartis back in 2014. Last year, GSK’s segment reported sales of 7.8 billion euros or $9.6 billion, growing at a CAGR of 4 percent from 2015-2017.

The two plan to launch new opportunities and operational improvements, but it will also heavily benefits GSK’s ability to deliver its 2020 forecast and invest effectively in priorities, said GSK in its statement.

GSK says the agreement allows certainty for the company’s capital planning and improves the group’s ability to plan allocation of capital. The transactions will be accretive to adjusted earnings in 2018.

“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.” said Emma Walmsley, Chief Executive Officer.

GSK says the Consumer Healthcare business is 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 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.” concluded Walmsley.

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