Novartis sells stake in consumer healthcare JV to GSK for $13.0 billion

Novartis will sell its 36.5 percent stake in its consumer healthcare joint venture (JV) to GSK for $13.0 billion, it said Tuesday, saying it is right time to sell non-core asset and focus on the development and growth of its core businesses. This will give GSK 100% ownership on the consumer healthcare business.

The joint venture was formed in 2015 as part of Novartis’ portfolio transformation, which comprised a three-part inter-conditional transaction with GSK, including the combination of the Novartis Over-the-Counter (OTC) business with the GSK consumer healthcare business into the existing JV.

Vas Narasimhan, CEO of Novartis, said the consumer healthcare JV with GSK was progressing well, but that its right time for Novartis to shed a non-core asset at an attractive price.

“This will strengthen our ability to allocate capital to grow our core businesses, drive shareholder returns, and execute value creating bolt-on acquisitions as we continue to build the leading medicines company, powered by digital and data,” Narasimhan said.

Emma Walmsley, Chief Executive Officer, GSK said in the company’s press release that the transaction is expected to benefit adjusted earnings and cash flows for the Group. “Most importantly it also removes uncertainty and allows us to plan use of our capital for other priorities, especially pharmaceuticals R&D.”

GSK also noted it would review 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, GSK said.

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. GSK said that 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 said it 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.

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

Novartis’s share of the net income from the consumer healthcare is reported as income from associated companies. According to the deal with GSK, it will pay $13.0 billion for Novartis’ stake in the consumer healthcare joint venture.

Four of the 11 directors of the joint JV Board appointed by Novartis will step down, the company said in its press release.