Shares soar after $900m Novartis and Glaxo deal


deputy business editor

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.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Louis Theroux: By Reason of Insanity takes him behind the bars again
tvBy Reason of Insanity, TV review
Arts and Entertainment
Cassetteboy's latest video is called Emperor's New Clothes rap
videoThe political parody genius duo strike again with new video
Seth Rollins cashes in his Money in the Bank contract to win the WWE World Heavyweight Championship
WWERollins win the WWE World Heavyweight title in one of the greatest WrestleMania's ever seen
Arts and Entertainment
tvPoldark, TV review
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor