Glaxo strikes £10 billion Pfizer merger to make global brand powerhouse

GlaxoSmithKline boss Emma Walmsley floored the City today as she unveiled a “landmark” blockbuster tie-up with rival Pfizer to create a £10 billion consumer health powerhouse.

The move, which paves the way for GSK to be split in two, will bring together brands including Panadol and Sensodyne with US giant Pfizer’s Advil and Chapstick, leaving GSK with a standalone pharmaceuticals business which Walmsley is keen to strengthen.

The new UK-based over-the counter goods firm, which will be led by Brian McNamara, will be spun off and listed separately on the London stock market within three years.

The combined businesses have annual sales of £9.8 billion and would claim a market share of 7.3%, putting the new entity ahead of rivals such as Johnson & Johnson. GSK will own 68% of the new business.

The update sent GSK roaring to the top of the blue-chip index, pushing the shares up 102.36p, or 7%, to 1550.56p.

It is the latest in a string of mega-deals from Walmsley, pictured, since taking the reins in April 2017. This year has seen GSK buy Switzerland’s Novartis out of their consumer healthcare joint venture for $9.2 billion, and unveil a $5.1 billion swoop for cancer-focused drugs firm Tesaro.

Walmsley, one of only a handful of FTSE 100 female bosses, said: “Today is a landmark day for GSK.”

The chief executive, who formerly headed GSK’s consumer care arm, added: “The new joint venture will be very well positioned to deliver stronger sales, cashflow and earnings growth, driven by category-leading power brands, science-based innovation and substantial cost synergies.”

GSK refused to comment on the number of jobs under threat but savings of £500 million by 2022 are expected. Walmsley stressed the firm was committed to being in the UK, adding: “In a beyond-Brexit world this is a very exciting country for businesses to be in.”

A history of inventions and alliances

The break-up of GSK undoes a merger forged 18 years ago with the marriage of Glaxo Wellcome and SmithKline Beecham, but the roots of the business stretch back well over a century. Glaxo Laboratories was registered as a company in 1935, and in 1995 merged with Burroughs Wellcome — itself founded in 1880 in London by two pharmacists — to become Glaxo Wellcome. Pharmacist Thomas Beecham first opened for business in 1848 and the company he founded invented Lucozade in the 1920s and Macleans toothpaste, before merging in 1982 with US company SmithKline Beckman, which traces its own history back to 1830s Philadelphia. After the 2000 merger GSK House in Brentford was opened by then Prime Minister Tony Blair in 2002.

The deal comes after GSK walked away from an auction to buy Pfizer’s consumer arm in March. Walmsley said today: “It was an auction which would have required us to cut across the capital allocation priorities that I’d set, when our number one priority was to invest in the strengthening of the pharma pipeline.”