GlaxoSmithKline ($GSK) underscored its ambitions for emerging markets with two new deals that amount to more than $1 billion. The U.K.-based company plans to boost its stake in its Indian consumer products affiliate to 75% from about 43%, and it's increasing ownership at a similar unit in Nigeria to 80%.
The Indian stock purchase is expected to amount to about $940 million, at a 3,900 rupee-per-share price. ($70.16, per Reuters). That's a premium of 28% to Friday's close on the Indian stock exchange.
The two buyout offers follow several years of increased investment in emerging markets for GSK, as well as for the pharma industry in general. Big Pharma has felt itself under threat in India recently, as the government and courts appear increasingly hostile to foreign IP rules and the higher prices they enable. Glaxo CEO Andrew Witty, however, has said he's still very "bullish" on the Indian market. And in consumer health, there are no prescription-drug patent fights.
GSK's Indian consumer business markets health-and-nutrition drinks sold under the Horlicks, Boost and VitaHealth brands. It also sells over-the-counter drugs, including branded generics, such as Crocin, the GSK brand of the common pain reliever paracetamol. GSK sees opportunity to expand geographically within India, Chief Strategy Officer David Redfern told Reuters. "A lot of the current business of Horlicks is in the south and the east of India," he said. "So there is still a great opportunity to increase the penetration in the north and the west."
By limiting its stake to 75%, Glaxo avoids triggering a requirement that it buy the remaining shares in the company, too. "[H]aving 75% control is as good as having full control," IndiaNivesh analyst Daljeet Kohli told the news service. "You can take any decision or pass any resolution you want."
Meanwhile, in Nigeria, GSK plans to almost double its stake in the consumer health unit. There, the company sells Horlicks products, as well as Lucozade sports drinks, Sensodyne toothpaste, Panadol pain pills and more. The company will pay about $98 million to end up with 80% of the group. As in India, the maximum stake falls short of automatic delisting requirements.