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Novartis sells stake in consumer health JV to GSK for $13B

Days after dropping its bid to acquire Pfizer Inc.'s $20 billion consumer healthcare unit, GlaxoSmithKline PLC agreed to buy Novartis AG's stake in the consumer health joint venture between the two drugmakers.

GSK will acquire Novartis' 36.5% stake in the JV for $13 billion in cash.

The venture was formed in 2015 as part of a strategic restructuring by Novartis, which holds the right to require GSK to buy its stake in the JV. GSK said buying out Novartis' stake removes uncertainty for its capital planning.

With full ownership of the unit, GSK Consumer Healthcare expects operating margins to approach mid-20s percentages by 2022 at 2017 CER. The deal is expected to be accretive to adjusted earnings beginning 2018, and is expected to strengthen operational cash flows.

GSK will also initiate a strategic review of Horlicks and its other consumer healthcare nutrition products to help fund the deal. The majority of sales for Horlicks and other nutrition products come from India, where they are sold by GlaxoSmithKline Consumer Healthcare Ltd. GSK will also review its 72.5% shareholding in the Indian company, and expects the strategic review to conclude by the end of 2018.

Novartis' CEO Vas Narasimhan said the company considers the consumer healthcare venture a noncore asset, and believes the sale will allow the company to focus on its core businesses.

All four of Novartis' directors from the 11-member joint JV board will step down following the completion of the deal.

The transaction is subject to approval from GSK's shareholders.