Issue Date: December 3, 2012 | Web Date: November 30, 2012
GlaxoSmithKline Makes A Move
GlaxoSmithKline is committing more than $1 billion to acquire majority ownership positions in its Indian and Nigerian subsidiaries. The deals are intended to continue the British firm’s move away from mature businesses, or what its CEO, Andrew Witty, has dubbed “white pills and Western markets.”
GSK has offered $947 million to raise its stake in India’s GSK Consumer Healthcare from 43.2% to as much as 75%. The business’s sales were $609 million in 2011 and have grown 19% per year over the past five years.
“This transaction represents a further step in GSK’s strategy to invest in the world’s fastest-growing markets,” GSK Chief Strategy Officer David Redfern says. For the first nine months of 2012, about 25% of the company’s $31 billion in sales came from emerging and Asia-Pacific markets, which also were the only ones to offer any growth.
Separately, GSK has a deal to increase its holding in GSK Consumer Nigeria from 46.4% to 80.0% for about $100 million. Sales of the business have been growing 21% annually over the past four years and reached $137 million in 2011.
The Nigerian health care market is forecast to grow about 10% this year but is risky because of poor government support, counterfeiting, and supply-chain issues, according to London-based Business Monitor International. “Multinationals looking to pursue the market will experience short-term difficulties but prosperous growth in the long term,” the market research firm predicts. In India, meanwhile, BMI expects double-digit market growth and stronger regulations.
Both transactions will leave just enough shares in public hands so that the subsidiaries will continue to trade on local stock exchanges.
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