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GSK mulls $8 billion healthcare consolidation deal

Published on 15/05/17 at 10:56am

When GSK and Novartis first agreed their business swap and healthcare joint venture, it was seen as marking a shift of the pharmaceutical industry towards more focused acquisition with better synergy in its pre-existing businesses. The deal saw GSK swap its cancer business for Novartis’ vaccine business and the two companies form a healthcare unit.

Now, GSK has to decide whether it wants to double down on the healthcare investment by offering to take the entire business off Novartis’ hands. The Sunday Times has suggested that this will be case, meaning that Novartis could sell its 36.5% stake in the healthcare unit to GSK next March in a deal thought to be worth around $8 billion.

The acquisition would see GSK take full control of the division that produces Beechams and Panadol. Novartis is thought to be willing to listen to the offer, as it would provide a significant injection of capital for its own planned acquisition.

Though it has been reported as potentially worrying to investors, there seems to be a consensus that GSK has been consistent in its desire to acquire the entire unit for some time – making it unlikely to come as a surprise.

What will be worrying for investors is Neil Woodford’s decision to sell his holding in the company. Woodford sells his stake, which is reported to be worth around £1 billion, due to its refusal to break-up the business into more focused units.

He suggested, in a blog post entitled ‘Glaxit’, that the GSK’s HIV business was a key driver of growth but he was worried about its prospects of this particular area in the near-future. Beyond this, Emma Walmsley’s suggestion that she favoured a continuation of the GSK model as it stands seems to have been another reason for Woodford’s investment exit from the company.

Ben Hargreaves

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