GSK goes for strategic review of Horlicks

The move is intended to fund buy-out of Novartis in consumer healthcare JV

March 27, 2018 05:53 pm | Updated 05:53 pm IST - CHENNAI:

 GlaxoSmithKline Consumer Healthcare Women's Horlicks.

GlaxoSmithKline Consumer Healthcare Women's Horlicks.

The UK-based GlaxoSmithKline plc. is initiating a ‘strategic review’ of Horlicks and other consumer healthcare nutrition products in India.

The move comes in the wake of its pact with Novartis to buy out 36.5% stake in their consumer healthcare joint venture for $13 billion.

In a global release, GlaxoSmithKline said it was initiating a strategic review of Horlicks and its other consumer healthcare nutrition products to support funding of the transaction and to drive increased focus on over-the-counter and oral health categories. Combined sales of these products were approximately £550 million in 2017.

The transaction is expected to be concluded in 2018, but there could be no assurance that the review process would result in any transaction, the release said.

GSK Consumer Healthcare Ltd., (GSK) a public listed company on the Bombay Stock Exchange and National Stock Exchange, is an associate of GlaxoSmithKline. The strategic review will include an assessment of GSK’s 72.5% shareholding in the company.

GSK is the category leader in Indian health food drinks industry. Horlicks is the flagship product and leads the market. Besides, it also markets and distributes a range of everyday health products such as Eno, Crocin, Iodex and Sensodyne.

The majority of Horlicks and other nutrition products sales are generated in India, with the Horlicks range widely recognised as a portfolio of premium nutrition products.

According to the release, the consumer healthcare joint venture was formed as part of the three-part transaction between GSK and Novartis in 2014. Last year, GSK’s Consumer Healthcare business reported sales of £7.8 billion.

Under the terms of the original transaction, Novartis has the right, exercisable from March 2, 2018 to March 2, 2035, to require GSK to purchase its stake (or specified tranches of it) in the joint venture. This put option created inherent uncertainty for the Group’s capital planning, the release said.

“The new agreement to buy-out Novartis’ stake removes this uncertainty and improves the Group’s ability to plan allocation of capital to its other priorities,” said Emma Walmsley, Chief Executive Officer, GSK.

“As a result of the transaction, GSK’s shareholders will capture the full value of GSK’s Consumer Healthcare growth,” he said.

``India remains a priority market for GSK investment and growth. The consumer healthcare business will continue to invest in growth opportunities for its OTC and oral health brands, such as Sensodyne and Eno. The Group is also actively investing in its pharmaceutical and vaccines businesses, including building new manufacturing capacity in Vemgal, Karnataka and Nashik,’’ the release said.

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