GlaxoSmithKline and Pfizer to form consumer healthcare joint venture
GSK will have a majority controlling equity interest of 68% and Pfizer will have an equity interest of 32% in the joint venture.
The new joint venture will be well-positioned to deliver stronger sales, cash flow and earnings growth driven by category leading Power Brands, science-based innovation and substantial cost synergies.
The combination will bring together two highly complementary portfolios of trusted consumer health brands, including GSK’s Sensodyne, Voltaren and Panadol and Pfizer’s Advil, Centrum and Caltrate.
The joint venture will be a category leader in Pain Relief, Respiratory, Vitamin and Mineral Supplements, Digestive Health, Skin Health and Therapeutic Oral Health.
The joint venture will be the global leader in OTC products with a market share of 7.3% ahead of its nearest competitor at 4.1% and have number 1 or 2 market share positions in all key geographies, including the US and China.
The proposed transaction is expected to realise substantial cost synergies, with the joint venture expected to generate total annual cost savings of £0.5 billion by 2022 for expected total cash costs of £0.9 billion and non-cash charges of £0.3 billion.
Planned divestments targeting around £1 billion of net proceeds are expected to cover the cash costs of the integration. Up to 25% of the cost savings are intended to be reinvested in the business to support innovation and other growth opportunities. Overall the joint venture will target an Adjusted operating margin percentage in the ‘mid-to-high 20’s’ by 2022.
GSK expects the proposed transaction to be accretive to Total earnings in the second full year following closing, reflecting the impact and timing for the costs of integration; and to be accretive to Adjusted earnings and free cashflow in the first full year after closing. ■