|Glaxo CEO Andrew Witty|
GlaxoSmithKline ($GSK) is slimming down again, this time with a long-anticipated deal to sell off two of its drinks brands. What was not anticipated was the price--£1.35 billion, or $2.11 billion--that Glaxo will reap from Japan's Suntory Beverage and Food. The deal is the latest step in GSK's quest to shed excess weight--and the latest example of Big Pharma's streamlining trend.
The two companies announced the deal for Lucozade and Ribena Monday, with a heftier price tag than the $1.6 billion Reuters first reported last week. As the news service notes, Suntory can well afford the transaction and is happy to do so, as both brands are well-established in Britain.
But the sale may prove even more strategic for Glaxo. Lucozade and Ribena combine for sales of just over £500 million ($784.75 million) a year, Reuters says. But the brands' U.K. recognition doesn't extend to other countries, particularly emerging markets at the center of GSK's consumer health strategy. So the company is taking the opportunity to unload the two brands.
Early this year, CEO Andrew Witty said he'd be tacking toward more asset sales, and so far he's been true to his word. When GSK opened Lucozade and Ribena up for bidding in February, attracting interest from private equity firms and industry buyers, the move fit right in with Glaxo's other recent selloffs. Aspen Global bought Australian rights to Valtrex, Amoxil and other GSK drugs last August, while Omega Pharma snapped up European rights to Zantac and other consumer products. Prestige Brands also got in on the action, snatching up North American rights to 17 of Glaxo's OTC meds. Together, those deals amounted to a cool $1.4 billion for GSK.
Glaxo's not stopping there. South Africa's Aspen Pharmacare is currently negotiating a $700 million deal for two of GSK's anti-clotting drugs, and other deals could follow. After all, Witty earlier this year disclosed plans to bundle some older products to create a new division, prompting spinoff speculation. And now that successful downsizing efforts from Pfizer ($PFE) and Abbott Laboratories ($ABT) have analysts spinoff-happy, the speculation likely won't stop there, either.
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