GlaxoSmithKline withdraws from running for Pfizer's consumer healthcare unit

GlaxoSmithKline announced Friday that it has withdrawn from the process relating to the potential purchase of Pfizer's consumer healthcare business, just days after Reckitt Benckiser ended its interest in the unit. GlaxoSmithKline CEO Emma Walmsley commented "while we will continue to review opportunities that may accelerate our strategy, they must meet our criteria for returns and not compromise our priorities for capital allocation."

Pfizer announced in October last year that it is reviewing strategic options for its consumer healthcare division, including a full or partial separation of the unit through a spin-off or sale. Walmsley said last month that a large consumer health acquisition was "not a need to have," although "you would expect us to take a serious look at any leading and very appealing assets in the sector."

Sources suggested that GlaxoSmithKline made a final bid on March 21 for Pfizer's consumer healthcare business, valuing the unit between $15 billion and $20 billion. However, Oddo & Cie analyst Sebastien Malafosse said that a purchase at that price "would have been too expensive," and "would have put [GlaxoSmithKline's] dividend at risk."

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In response to the latest news, Pfizer indicated that it continues to evaluate potential alternatives for the business, with a spokesman reiterating that a final decision has not been taken, but is expected this year.

When Reckitt Benckiser pulled out of discussions with Pfizer, CEO Rakesh Kapoor noted that "an acquisition for the whole Pfizer consumer health business did not fit our acquisition criteria and an acquisition of part of the business was not possible." Bernstein analysts remarked that Pfizer's hopes of raising around $20 billion from the sale of the division contrasted with both GlaxoSmithKline and Reckitt Benckiser's need for financial discipline.

For related analysis, see ViewPoints: The new GlaxoSmithKline shows it is anything but predictable.


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