GlaxoSmithKline $12.7 Billion Agreement with Pfizer Inc to combine their consumer health businesses

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. Khaitan & Co acted as legal counsel for Pfizer Inc. for the merger filing in India. Kirkland & Ellis and Slaughter and May represented GlaxoSmithKline on the deal

GlaxoSmithKline plc (LSE/NYSE: GSK) has reached agreement with Pfizer Inc to combine their consumer health businesses into a new world-leading Joint Venture, with combined sales of approximately £9.8 billion ($12.7 billion)[1]. GSK will have a majority controlling equity interest of 68% and Pfizer will have an equity interest of 32% in the Joint Venture.

The proposed all-equity transaction represents a compelling opportunity to build on the recent buyout of Novartis’ stake in GSK Consumer Healthcare, to create a new world-leading consumer healthcare business and to deliver further significant shareholder value. The proposed transaction also supports GSK’s key priority of strengthening its pharmaceuticals business over the next few years by increasing cashflows and providing an effective pathway through the separation of GSK Consumer Healthcare to build further support for investment in its R&D pipeline.

The new Joint Venture will be well-positioned to deliver stronger sales, cash flow and earnings growth driven by category leading Power Brands, science-based innovation and substantial cost synergies. The combination will bring together two highly complementary portfolios of trusted consumer health brands, including GSK’s Sensodyne, Voltaren and Panadol and Pfizer’s Advil, Centrum and Caltrate. The Joint Venture will be a category leader in Pain Relief, Respiratory, Vitamin and Mineral Supplements, Digestive Health, Skin Health and Therapeutic Oral Health. The Joint Venture will be the global leader in OTC products with a market share of 7.3% ahead of its nearest competitor at 4.1% and have number 1 or 2 market share positions in all key geographies, including the US and China.

The proposed transaction is expected to realise substantial cost synergies, with the Joint Venture expected to generate total annual cost savings of £0.5 billion by 2022 for expected total cash costs of £0.9 billion and non-cash charges of £0.3 billion. Planned divestments targeting around £1 billion of net proceeds are expected to cover the cash costs of the integration. Up to 25% of the cost savings are intended to be reinvested in the business to support innovation and other growth opportunities. Overall the Joint Venture will target an Adjusted operating margin percentage in the ‘mid-to-high 20’s’ by 2022.

Kirkland advised GlaxoSmithKline 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.

Wachtell, Lipton, Rosen & Katz advised Pfizer with a team led by Jake Kling.

Clifford Chance advised Pfizer with Sarah Jones, Gareth Camp, Simon Thomas, Angela Becker, Alanna Hunter, and David Jahoda and Christine Kim.

Skadden advised Pfizer with a team including Sally Thurston, Brian Krause, Alex Jupp, Alec Jarvis, Jisun Choi, Jennifer Sabin and Joseph Hone (Tax).

Khaitan & Co acted as legal counsel for Pfizer Inc. for the merger filing in India before the Competition Commission of India with a team including Arshad (Paku) Khan, Anisha Chand, Radhika Seth and Anmol Awasthi.

Involved fees earner: Angela Becker – Clifford Chance; Gareth Camp – Clifford Chance; Alanna Hunter – Clifford Chance; David Jahoda – Clifford Chance; Sarah Jones – Clifford Chance; Christine Kim – Clifford Chance; Simon Thomas – Clifford Chance; Anisha Chand – Khaitan & Co.; Arshad Khan – Khaitan & Co.; 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; Jisun Choi – Skadden Arps Slate Meager & Flom; Alec Jarvis – Skadden Arps Slate Meager & Flom; Alex Jupp – Skadden Arps Slate Meager & Flom; Brian Krause – Skadden Arps Slate Meager & Flom; Jennifer Sabin – Skadden Arps Slate Meager & Flom; Sally Thurston – Skadden Arps Slate Meager & Flom; Jacob Kling – Wachtell, Lipton, Rosen & Katz;

Law Firms: Clifford Chance; Khaitan & Co.; Kirkland & Ellis; Skadden Arps Slate Meager & Flom; Wachtell, Lipton, Rosen & Katz;

Clients: GlaxoSmithKline plc; Pfizer;

Author: Ambrogio Visconti