How we evaluate our investment options

Written by Sir Andrew Witty

Over our recent history, we have completed a number of corporate transactions that have redefined the shape of GSK and realised significant value for our shareholders.

From acquisitions and divestments to mergers and joint ventures, each deal is carefully considered against other investment options. Determining the strategic rationale is the main driver for any deal; our recent acquisitions have helped us expand in specific regions or therapy areas, and our divestments have enabled us to refocus our businesses.

Our recent acquisitions have been in higher-growth areas such as emerging markets, vaccines and consumer healthcare, concentrating on smaller businesses with strong product portfolios. We have also sought opportunities where we will have a significant competitive advantage in the market through our ability to develop, manufacture, market and distribute products.

We have strict financial rules in place to ensure that we are investing in the right opportunities and paying or securing the right price. By increasing our stakes of businesses we already own, such as the Indian Pharmaceutical and Consumer Healthcare businesses, we are able to benefit from a greater share of the economics in businesses we know well. Ultimately, we devote many hours to due diligence - to ensure we understand the risks and opportunities for each potential investment - and carefully assess the expected financial returns.

Investor information:

Novartis Transaction

On occasion, we complete complex strategic deals and our recent deal announced with Novartis falls into this category. Subject to shareholder and regulatory approvals, the three-part deal is expected to complete in the first half of 2015. It will support the long-term future of the company, and substantially strengthen our Consumer Healthcare and Vaccines businesses.

Firstly it will create a new world-leading Consumer Healthcare business bringing together complementary portfolios with first or second positions in core categories such as Oral Care, Wellness and Skin Health. The combined businesses will be OTC market leader in more than 35 countries and have significant opportunities for further globalisation of brands.


The combined businesses will be OTC market leader in more than 35 countries and have significant opportunities for further globalisation of brands

Secondly, the transaction will consolidate our position as a world-leader in vaccines. The acquisition brings new breadth to our vaccines portfolio and pipeline, including enhancing our position in meningitis with a number of new vaccines. We will also strengthen our manufacturing network and reduce supply costs.

The third part of the deal will enable us to realise significant value from selling our marketed oncology portfolio to Novartis who will be best placed to commercialise these assets.

£4 billion

Following the completion of the transaction we expect to return £4bn to our shareholders.

This transaction will help GSK drive sustainable sales growth and improve long-term earnings, especially by the strengthening of businesses such as vaccines and consumer healthcare which are not exposed to patent cliffs.       

Re-focusing the portfolio

Sometimes there are other companies that could be better owners of our assets, in part because incremental value can be created as a result of potential synergies with other parts of the acquiring company. This creates an opportunity for both GSK and the acquiring companies to realise value through divestments.


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