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GSK, Pfizer create joint venture

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WARREN, N.J. — Pfizer Inc. and GlaxoSmithKline PLC (GSK) have entered into an agreement that will create a premier global consumer health care company with robust iconic brands. The boards of directors of both companies have unanimously approved the transaction under which Pfizer will contribute its consumer health care business to GSK’s existing consumer health care business. The total 2017 global sales for the two businesses were approximately $12.7 billion.

“We are pleased to announce this new joint venture for Pfizer Consumer Healthcare, delivering on our commitment to complete the strategic review for this business in 2018,” commented Ian Read, chairman and current chief executive officer of Pfizer. “Pfizer and GSK have an excellent track record of creating successful collaborations, and we look forward to working together again to unlock the potential of our combined consumer health care ­businesses.”

Under the terms of the deal, Pfizer will receive a 32% equity stake in the joint venture, entitling Pfizer to its pro rata share of the joint venture’s earnings and dividends, which will be paid on a quarterly basis. Pfizer will have the right to appoint three out of the nine members of the joint venture’s board. The transaction is expected to deliver $650 million in peak cost synergies and to be slightly accretive for Pfizer in each of the first three years after the close of the transaction, which is anticipated during the second half of 2019, subject to receipt of GSK shareholder approval, regulatory approvals and satisfaction of other customary closing ­conditions.

As Pfizer will own less than 50% of the joint venture, Pfizer anticipates deconsolidating Pfizer Consumer Healthcare from its financial statements following the closing of the transaction. In the near term to medium term, this deconsolidation is not expected to have a material impact on Pfizer’s top-line growth. In addition, given that the Consumer Healthcare business records lower margins than Pfizer’s other businesses, the deconsolidation is expected to have a slight positive impact on Pfizer’s operating margins over the next several years.

Following the integration of the combined business, GSK intends to separate the joint venture as an independent company via a demerger of its equity interest to its shareholders and a listing of the Consumer Healthcare business on the U.K. equity market. GSK will have the sole right to decide whether and when to initiate a separation and listing for a period of five years from closing of the proposed transaction. GSK may also sell all or part of its stake in the joint venture in a contemporaneous IPO. The joint venture will be a category leader in pain relief, respiratory, vitamin and mineral supplements, digestive health, skin health and therapeutic oral health and will be the largest global consumer health care business.


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