GSK & Pfizer to merge consumer healthcare lines

GSK has announced it will merge its consumer healthcare business with Pfizer, in a major shake-up of the company.

The two companies will combine their two consumer healthcare portfolios in a £10 billion joint venture which is expected to be the global leader in over-the-counter (OTC) products. GSK will have a majority stake (68%) in the new healthcare company, titled GSK Consumer Healthcare, with Pfizer having the remaining 32%.

GSK said that it plans to demerge its current consumer healthcare line through a listing on the UK stock market within three years. This will effectively separate GSK into two business focusing on pharmaceuticals and consumer healthcare products respectively.

The new venture comes after 18 months of GSK reshaping its portfolios through a number of R&D initiatives and acquisitions, leading to the company improving its operating performance.

Speaking about the merger, Emma Walmsley, chief executive officer, GSK, said: “The transaction we have announced today is a unique opportunity to accelerate this work. Through the combination of GSK and Pfizer’s consumer healthcare businesses we will create substantial further value for shareholders. At the same time, incremental cashflows and visibility of the intended separation will help support GSK’s future capital planning and further investment in our pharmaceuticals pipeline.

“With our future intention to separate, the transaction also presents a clear pathway forward for GSK to create a new global Pharmaceuticals/Vaccines company, with an R&D approach focused on science related to the immune system, use of genetics and advanced technologies, and a new world-leading Consumer Healthcare company.

“Ultimately, our goal is to create two exceptional, UK-based global companies, with appropriate capital structures, that are each well positioned to deliver improving returns to shareholders and significant benefits to patients and consumers.”

John Colley, professor of practice at Warwick Business School, said that the deal makes commercial sense and will “no doubt create significant value for shareholders.”

"However one suspects that there are limited links between the current consumer healthcare division and the rest of the business, so why will it take so long for the carve out and separate listing to be undertaken?

"A three year timescale may well cover a period of turbulence in the markets, which will create further delay. Is it sometime never?

One suspects that Emma Walmsley’s close affinity with the division may be at the root of slow progress," Colley added.

“The combination of these leading businesses with distinct regional and category strengths will be more sustainable and broader in scope than either company individually,” said Albert Bourla, chief operating officer, Pfizer. “We believe that this joint venture is a great opportunity to ensure the future success of Pfizer Consumer Healthcare while unlocking meaningful after-tax value for Pfizer shareholders.”