Shares soar after $900m Novartis and Glaxo deal
Jim Armitage is the City editor of The Independent and London Evening Standard group of newspapers. He has been a reporter and editor for more than 20 years and was recently shortlisted for the Press Gazette financial journalist of the year and The Society of Editors financial journalist of the year awards. He contributes news, investigative reports and comment to the Independent titles plus a daily column in the Evening Standard.
deputy business editor
Wednesday 23 April 2014
GlaxoSmithKline and Swiss pharmaceuticals rival Novartis have agreed to pay the other $900m (£535m) if one of them pulls out of the major medicines swap deal that will see the British giant quit trying to make blockbuster cancer treatments.
The punitive termination fees were seen as a key indicator of the pair's confidence in pulling off what is the biggest shake-up for the company since the merger of Glaxo and SmithKline Beecham. Glaxo will sell its cancer drugs to Novartis for $16bn, buying the Swiss giant's vaccines operation for $5.25bn. The pair will merge consumer health divisions to create a £6.5bn business spanning Aquafresh toothpaste, Tixylix cough mixture and Savlon. Glaxo will have a 63.5 per cent stake, and its consumer boss Emma Walmsley will run it.
Glaxo is dangling £4bn in cash proceeds from the deal to tempt investors to approve the deal at an extraordinary general meeting. Shares in the drugmaker rose 81p to 1640p.
The transaction marks a clear admission by Glaxo chief executive Sir Andrew Witty, eight years into his reign, that the company cannot compete in the cancer research field, where its treatments have suffered setbacks and only occupy 14th in the global league tables compared with Novartis's number two spot.
But it also reinforces his belief that the days of mega-mergers and acquisitions (M&A) to create behemoths covering every division of healthcare are over – in stark contrast to rival Pfizer's strategy, with the emergence of its £76bn approach for AstraZeneca. Mr Witty said: "M&A is a strategy to be used sparingly."
Glaxo's purchase of Novartis's vaccines division gives it more muscle in a fast-growing sector. Novartis's portfolio includes inoculations against meningitis, polio, rabies and tetanus as well as flu, although Glaxo will inherit Novartis's battle with the British Government over the price it charges the NHS for its meningitis B vaccine. Such pricing pressures from buyers around the world, and the impact of cheaper generic copies of medicines as they come off patent, will continue to drive major shake-ups by the drug giants, Mr Witty said.
After the deal, 70 per cent of Glaxo's revenues will come from the areas of respiratory, HIV, vaccines and the consumer joint venture.
Rainmaker brothers: Fourth massive deal
The deal is another triumph for veteran Moroccan takeover "rainmakers" Yoel and Michael Zaoui, who advised GlaxoSmithKline on what is the fourth massive deal since the brothers set up in business together just six months ago.
For two decades, they conducted some of the biggest takeovers in the world, with Yoel running Goldman Sachs's deal team and Michael Morgan Stanley's.
Since founding Zaoui & Co they have advised L'Oreal, Peugeot and Lafarge on multi-billion dollar deals.
- 1 East 17 bandmember Brian Harvey in 'very desperate situation’
- 2 Yorkshire man to win £10,000 off a £1 bet placed six years ago if Dan Jarvis becomes Labour Party leader
- 3 Vladimir Putin says Russia will fight for the right of Palestinians to their own state
- 4 Woman filmed launching racist tirade against men on the Tube for speaking in 'own lingo'
- 5 The West has it totally wrong on Lee Kuan Yew
East 17 bandmember Brian Harvey in 'very desperate situation’
Vladimir Putin says Russia will fight for the right of Palestinians to their own state
Ohio Democrat Teresa Fedor speaks out during abortion debate to reveal she has been raped – and is interrupted by laughter from Republicans
Children take eight Isis captives to be beheaded in latest propaganda video
Jeremy Clarkson 'could be given minder' ahead of a potential Top Gear return
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
JK Rowling responds to fan tweeting she 'can't see' Dumbledore being gay
Jeremy Clarkson sacked live: Alan Yentob 'wouldn't rule out' ex Top Gear host's BBC return
David Cameron calls Labour 'hopeless, sneering socialists' while announcing 7-day NHS plans
The West has it totally wrong on Lee Kuan Yew
Revealed: Putin's army of pro-Kremlin bloggers
iJobs Money & Business
Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...
Negotiable: Recruitment Genius: You will be the first point of contact for all...
£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...
£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...