GSK set out plans on Wednesday to turn its consumer healthcare business into a separately listed company, aiming to strengthen drug development at its pharmaceuticals business with a windfall of 8 billion pounds ($11 billion).
Investors have been waiting for details of the separation, which was unveiled in December 2018, when GSK agreed to a joint venture for consumer brands such as Sensodyne toothpaste and Advil painkillers with Pfizer.
The de-merger, planned for the middle of next year, will allow GSK to focus on bolstering a core drugs business, which has been hit by a lack of fast-growing products and patients deferring treatments due to the COVID-19 pandemic.
Despite being the world’s biggest vaccine maker, GSK has also been beaten by the likes of Pfizer, Moderna and AstraZeneca to making a COVID-19 vaccine.
“I am very aware that GSK shares have underperformed for a long period,” CEO Emma Walmsley told a news conference.
“Together, we are now ready to deliver a step-change in growth for New GSK and unlock the value of Consumer Healthcare,” added Walmsley, who plans to stay on after the transaction.
Pressure has been increasing on Walmsley following a report in April that activist investor Elliott had taken a multibillion-pound stake in GSK.
Sales growth
GSK is currently valued at about 10.3 times its forecast core earnings, including net debt, below an average of more than 12 for global pharma majors, Refinitiv Eikon data shows.
Its shares have fallen about 14 percent over the past 12 months.
GSK predicted the pharmaceuticals business would increase sales by more than 5 percent a year to 2026, broadly in line with analysts’ current expectations.
It said that business was expected to receive a dividend of up to 8 billion pounds from the consumer arm, which will have its own listing on the London Stock Exchange.
As expected, the consumer operations will take on a higher share of debt, and the combined dividend of the two businesses will be reduced.
That should help to give the pharmaceuticals business in particular more scope to invest in drug development and deals.
GSK shareholders will receive stock in the new consumer healthcare group amounting to at least 80 percent of the 68 percent stake that GSK currently owns in it.
Pfizer has the remaining 32 percent.
GSK stands at the medical device and healthcare exhibition area of the Shanghai Expo 2020 in Shanghai on November 6, 2020 Photo: IC
