GlaxoSmithKline plc’s World-Leading Consumer Healthcare Joint Venture With Pfizer plc

Centerview Partners LLC, Guggenheim Securities, LLC and Morgan Stanley & Co. LLC served as Pfizer’s financial advisors, Wachtell, Lipton, Rosen & Katz, and Clifford Chance LLP served as its legal advisors, and Skadden, Arps, Slate, Meagher & Flom LLP served as its tax advisor. Kirkland & Ellis LLP and Slaughter and May advised GlaxoSmithKline plc

Pfizer Inc. (NYSE: PFE) and GlaxoSmithKline plc (NYSE:GSK) have entered into an agreement to create a premier global consumer healthcare company with robust iconic brands.

The Boards of Directors of both companies have unanimously approved the transaction under which Pfizer will contribute its consumer healthcare business to GlaxoSmithKline’s existing consumer healthcare business. The 2017 global sales for the combined business were approximately $12.7 billion.

Under the terms of the transaction, Pfizer will receive a 32% equity stake in the joint venture, entitling Pfizer to its pro rata share of the joint venture’s earnings and dividends, which will be paid on a quarterly basis. Pfizer will have the right to appoint three out of the nine members of the joint venture’s board. The transaction is expected to deliver $650 million in peak cost synergies and to be slightly accretive for Pfizer in each of the first three years after the close of the transaction, which is anticipated during the second half of 2019, subject to receipt of GSK shareholder approval and regulatory approvals, and satisfaction of other customary closing conditions.

As Pfizer will own less than 50% of the joint venture, Pfizer anticipates deconsolidating Pfizer Consumer Healthcare from its financial statements following the closing of the transaction. In the near- to medium-term, this deconsolidation is not expected to have a material impact on Pfizer’s top-line growth. In addition, given the Consumer Healthcare business records lower margins than Pfizer’s other businesses, the deconsolidation is expected to have a slight positive impact on Pfizer’s operating margins over the next several years.

Following the integration of the combined business, GSK intends to separate the joint venture as an independent company via a demerger of its equity interest to its shareholders and a listing of the Consumer Healthcare business on the UK equity market. GSK will have the sole right to decide whether and when to initiate a separation and listing for a period of five years from closing of the proposed transaction. GSK may also sell all or part of its stake in the joint venture in a contemporaneous IPO.

Should a separation and listing occur during the first five years after closing, Pfizer has the option to participate through the distribution of its equity interest in the joint venture to its shareholders or the sale of its equity interest in a contemporaneous IPO. After the fifth anniversary of the closing of the proposed transaction, both GSK and Pfizer will have the right to decide whether and when to initiate a separation and public listing of the joint venture.

Wachtell advised Pfizer with a team including corporate partners Edward Herlihy, David Lam, Jacob Kling.

Clifford Chance advised Pfizer with Gareth Camp and Simon Thomas and Sarah Jones.

Skadden Arps Slate Meagher & Flom also provided tax advice.

Kirkland & Ellis LLP advised GlaxoSmithKline plc with a team including corporate partners Daniel Wolf (Picture), Eric Schiele, Claire James and Patrick Jacobs along with David Fox; and tax partners Dean Shulman and Benjamin Schreiner and associate David Mannion.

Slaughter and May advised GlaxoSmithKline plc with a team including David Johnson, Simon Nicholls, Claire Jackson, Warwick Brennand, Hector Sants, Jack Wharton, Adrian Gibbs, Dominic Robertson, Orlaith Kane, Emma Game and Rose Swaffield.

Involved fees earner: Gareth Camp – Clifford Chance; Sarah Jones – Clifford Chance; Simon Thomas – Clifford Chance; David Fox – Kirkland & Ellis; Patrick Jacobs – Kirkland & Ellis; Claire James – Kirkland & Ellis; David Mannion – Kirkland & Ellis; Eric Schiele – Kirkland & Ellis; Benjamin Schreiner – Kirkland & Ellis; Dean Shulman – Kirkland & Ellis; Daniel Wolf – Kirkland & Ellis; Warwick Brennand – Slaughter and May; Emma Game – Slaughter and May; Adrian Gibbs – Slaughter and May; Claire Jackson – Slaughter and May; David Johnson – Slaughter and May; Orlaith Kane – Slaughter and May; Simon Nicholls – Slaughter and May; Dominic Robertson – Slaughter and May; Hector Sants – Slaughter and May; Rose Swaffield – Slaughter and May; Jack Wharton – Slaughter and May; Edward Herlihy – Wachtell, Lipton, Rosen & Katz; Jacob Kling – Wachtell, Lipton, Rosen & Katz; David Lam – Wachtell, Lipton, Rosen & Katz;

Law Firms: Clifford Chance; Kirkland & Ellis; Slaughter and May; Wachtell, Lipton, Rosen & Katz;

Clients: GlaxoSmithKline plc; Pfizer;