GlaxoSmithKline (GSK) announces that it has reached an agreement with Novartis (NVS) for the buyout of Novartis’ 36.5% stake in their Consumer Healthcare joint venture for $13B.

The Consumer Healthcare joint venture was formed as part of the three-part transaction between GSK and Novartis which was approved by shareholders in 2014. Last year, GSK’s Consumer Healthcare business reported sales of GBP 7.8B. Under the terms of the original transaction, Novartis has the right, exercisable from March 2, 2018, to March 2, 2035, to require GSK to purchase its stake in the joint venture. “This put option, in both size and possible timing, creates inherent uncertainty for the Group’s capital planning. The new agreement to buy-out Novartis’ stake removes this uncertainty and improves the Group’s ability to plan allocation of capital to its other priorities,” the company said.

The business expects operating margins to approach “mid-20’s” percentages by 2022 at 2017 CER. The transaction is expected to be accretive to adjusted earnings in 2018 and thereafter, and is expected to “strengthen operational cash flows.” GSK added, “Together with the Group’s new launch opportunities and expected operational improvements, these financial benefits further support GSK’s increased confidence in its ability to deliver its 2020 outlooks and invest effectively in the Group’s other priorities.”

The transaction is subject to approval by GSK shareholders as Novartis.

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