In a bid move which accelerates its strategy of divestment of non-core products, UK pharma major GlaxoSmithKline has sold 17 brands to US firm Prestige.
IHS Global Insight Perspective | |
Significance | GlaxoSmithKline (GSK; UK) has sold 17 over-the-counter (OTC) brands to US firm Prestige, in a deal worth USD660 million. |
Implications | The deal will expand Prestige's OTC annual revenues to USD500 million and boost its presence in two new areas: aspirin-based analgesics and gastrointestinal therapies. |
Outlook | The sales will boost Prestige's consumer healthcare presence, while GSK is expected to divest a further cache of non-core brands next year. |
Sale of Brands
UK firm GlaxoSmithKline (GSK) and US-based Prestige Brands Holdings Inc. have signed a definitive agreement to acquire the former's 17 over-the-counter (OTC) pharmaceutical brands sold in North America. The transaction is worth GBP426 million (USD600 million) in cash and is expected to be completed in the first half of 2012 subject to regulatory and other closing conditions, the firms said. The brands being divested include BC, Goody's, Beano, Ecotrin, Fiber Choice and Tagamet, and generated sales of GBP134 million in 2010 and GBP98 million in the first nine months of 2011.
GSK said that the divestment deal proposed is part of the simplification of its consumer healthcare business. The net cash proceeds from the deal will be GBP242 million for the UK pharma major. The net profit on this divestment will be about GBP240 million pre-tax and GBP145 million post-tax.
For Prestige Brands Inc., the move will provide a strengthened portfolio with total OTC revenues of about USD500 million as well as entry into two new therapy categories, namely adult aspirin-based analgesics and gastrointestinal products. Furthermore, the firm said that the acquisition will result in annual corporate revenues of about USD600 million, with the OTC business remaining predominant at 85% of revenues and 90% of profits. The firm anticipates that the addition of brands from GSK will be accretive in fiscal year 2012/13.
Outlook and Implications
The sale of the non-core OTC brands by GSK had been expected after the UK major announced in early 2011 plans to divest its non-core brands and focus on its consumer healthcare products business. Following this divestment, the firm will now concentrate on the remaining brands in its non-core list, which include those sold outside the US and Canada, and its weight-management drug Alli (orlistat). The firm said that these assets generated sales of approximately GBP400 million in 2010 and GBP262 million in the first nine months of 2011. The figures depict a potentially valuable transaction for the remaining products and a deal is expected in the short term. The benefits of the sale of these brands will contribute to strengthening the firm's financial position.
For Prestige, this purchase marks the strengthening of its OTC portfolio following a slew of acquisitions since 2004. In the past year, the firm has bought five brands from Blacksmith Brands as well as Dramamine from Johnson & Johnson (US). The aggressive buying strategy provides Prestige with new inroads into the healthcare market, enabling the firm to enter into new therapy segments.
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