GSK split edges closer as OTC joint venture deal with Pfizer closes

The breakup of GSK has moved a step closer after the companies closed the deal to create the world’s largest over-the-counter pharma business as a joint venture.

Pfizer owns a 32% equity stake in the joint venture and GSK owns 68% and the combined business will operate globally as GSK Consumer Healthcare, under the leadership of CEO Brian McNamara.

The combined business will have sales of £9.8 billion and includes a range of products in pain relief, respiratory and vitamins, minerals and supplements, and therapeutic oral health.

Operating together, the two business will hold the number one OTC position in the US and the number two OTC position in China – the two biggest OTC markets in the world.

The plan is to separate the joint venture as an independent company via a demerger of its equity interest to its shareholders, and a listing of the joint venture on the UK equity market.

GSK has the sole right to decide whether and when to begin a separation and listing period of five years following the closing. It can also sell off part of its stake in the joint venture in an IPO.

Integrating the two business is expected to realise annual cost savings of £500,000 by 2022, for expected cash costs of £900 million and non-cash charges of £300 million.

GSK intends to reinvest 25% of cost savings in the business to support “innovation and other growth opportunities”.

The joint venture is part of CEO Emma Walmsley’s strategy to reshape GSK to simplify it and keep shareholders onside with improved efficiency and new revenues.

Walmsley, who is also chair of the joint venture, said: “The completion of the joint venture with Pfizer marks the beginning of the next phase of our transformation of GSK.

“This is an important moment for the group, laying the foundation for two great companies, one in pharmaceuticals and vaccines and one in consumer health.”