GlaxoSmithKline (GSK) is delivering a £4bn windfall to shareholders following the conclusion of a three-way deal with Novartis.
The deal comes in the wake of a dreadful 2014 for the British drugmaker in which turnover fell by 10 per cent and profits slumped 15 per cent after declining sales in the US and a bribery scandal in China, which cost the company £300m.
As part of the deal, GSK has acquired Novartis’ global vaccines business for an initial cash consideration of $5.25bn (£3.4bn) while divesting its oncology division for $16bn.
In addition, the company has entered into a joint venture with Novartis focusing on consumer healthcare, in which GSK has a majority interest of 63.5 per cent.
The $7.8bn (£5.2bn) post-tax net proceeds of the transaction will be partially used for a capital return to shareholders, subject to shareholder approval, and is expected to be implemented through a B share scheme, which will provide capital treatment for all UK tax-resident shareholders.
Chief executive officer, Sir Andrew Witty, said: “Completion of this transaction represents a major step forward in the group’s strategy to create a stronger and more balanced set of businesses across pharmaceuticals, consumer healthcare and vaccines.
“We will now be focused on rapidly implementing our integration plans to realise the growth and synergy opportunities we see in the new Consumer Healthcare and Vaccines businesses. We look forward to sharing more details of this with our shareholders on 6 May.”
For Novartis, the asset swaps will boost the company’s already substantial presence in oncology and are expected to lift core margins immediately – being cut by 51 per cent. The Swiss drugmaker now has a portfolio of 22 oncology and haematology medicines.