GlaxoSmithKline (GSK) and Pfizer have agreed to merge their consumer health businesses to create a new joint venture with an estimated £9.8bn ($12.7bn) in annual sales.
According to the agreement, GSK will own 68% interest in the joint venture and Pfizer will own the remaining 32% stake.
The new entity is expected to yield stronger sales, cash flow and earnings growth through established brands, innovation and substantial cost synergies.
Its portfolio will feature consumer healthcare products across pain relief, respiratory, vitamin and mineral supplements, digestive health, skin health and therapeutic oral health categories.
The partners believe that the new joint venture will be well-positioned in the over-the-counter products market with a 7.3% share. The venture is also expected to be the first or second largest consumer health firm in key geographies, including the US, Europe, China, India and Australasia.
Pfizer chief operating officer Albert Bourla said: “The combination of these leading businesses with distinct regional and category strengths will be more sustainable and broader in scope than either company individually.”
The JV agreement comes after GSK backed out of the approximately $20bn auction of Pfizer’s Consumer Healthcare business in March this year. The British pharmaceutical giant then went on to buyout Novartis’ 36.5% stake in their consumer healthcare joint venture for $13bn.
GSK said that the latest deal will support the buyout of Novartis’ stake and boost its pharmaceuticals business over the next few years.
Subject to GSK shareholder and other customary approvals, the transaction is expected to close in the second half of next year. The joint venture will operate under the GSK Consumer Healthcare name.
Within three years of the closing, GSK intends to separate the new company through a demerger of its equity interest and a listing of the Consumer Healthcare unit on the UK equity market.
The company may also completely or partially divest its stake in a contemporaneous initial public offering (IPO), Pfizer added.
GSK CEO Emma Walmsley said: “Ultimately, our goal is to create two exceptional, UK-based global companies, with appropriate capital structures, that are each well positioned to deliver improving returns to shareholders and significant benefits to patients and consumers.”
In case of a separation and listing during the initial five years after closing, Pfizer will have an option to participate via its equity interest distribution to its shareholders or sale in a contemporaneous IPO.