Spinoff or $54B sale? GlaxoSmithKline's consumer health outfit draws buyout interest: report

As GlaxoSmithKline approaches the end of a two-year journey to spin off its consumer health joint venture with Pfizer, the demerger pathway suddenly looks less certain.

Several private equity firms are sizing up GSK’s consumer health unit, which could be valued at £40 billion ($54 billion), Bloomberg reported Tuesday, citing people with knowledge of the matter.

Some familiar names to the biopharma world are among potential suitors, including Zentiva owner Advent International, CVC Capital Partners and KKR & Co., Bloomberg reported. Blackstone, Carlyle Group and Permira are also viewed as possible buyers, the people told the business news service.

A sale would contradict GSK’s current plan to separate the consumer health franchise into a standalone, U.K.-listed firm mid-2022. In a statement to Fierce Pharma, a GSK spokesperson said the demerger process is “well-advanced,” and that the company is “firmly on track” to meet the mid-2022 timeline.

“The feedback we have received from our shareholders is that they are very keen to own the new consumer healthcare company as a listed entity through the demerger and to benefit from its exciting growth prospects,” the spokesperson said. “They also want us to stick to the timetable for delivering it.”

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When unveiling the gigantic merger with Pfizer’s consumer health business in late 2018, GSK already knew it wanted to exit consumer health and focus on innovative drugs and vaccines. The exact form of the separation—through a demerger—was unveiled in June.

But that plan soon became a target for activist investment firm Elliott Management. In an open letter to GSK’s board earlier, the fund manager suggested the British pharma consider a sale of the franchise and use the proceeds to support R&D, pay down debt and buy back shares. At that time, Elliott made it sound like it had already talked to potential buyers.

“If such opportunities arise in the next few months, we urge the board to evaluate them impartially against the default spin and sell-down plan announced in the investor update,” Elliott said at the time.

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Elliott declined to comment on Bloomberg’s report or whether it’s involved in soliciting buyers for GSK consumer health. As for GSK, the company spokesperson said the company's board will “fulfill its fiduciary duties to evaluate any alternative options for Consumer Healthcare which may arise that maximize value for all shareholders.

No transaction is certain at this point, Bloomberg reported. Given the size of GSK consumer health, with £10 billion sales in 2020, an acquisition would be too big for any investment firm to take on its own. The companies may form a buyout consortium and include sovereign wealth funds or pension managers, Bloomberg’s sources said.