Teams from magic circle firms Slaughter & May and Freshfields Bruckhaus Deringer have taken lead roles on GlaxoSmithKline’s US$13 billion acquisition of Novartis’ stake in a consumer healthcare joint venture the two companies set up in 2014.
GSK announced on 27 March that it had planned to buy out the Swiss company’s 36.5% stake in the joint venture, which sells products including Sensodyne toothpaste and painkiller Panadol, following anticipated shareholder approval of the deal in the second quarter of 2018.
Novartis CEO Vas Narasimhan said that divesting the company’s stake in the joint venture – at what he called an “attractive price” – would free it up to focus on its core pharmaceuticals business and pursue “value creating bolt-on acquisitions”.
GSK was advised by Slaughters’ London partners David Johnson and Simon Nicholls in the corporate departments, alongside financing partners Guy O’Keefe and Oliver Storey, and tax partner Dominic Robertson. Bertrand Louveaux and Jordan Ellison in Brussels provided competition advice.
Freshfields’ London manager partner Julian Long and Jennifer Bethlehem gave corporate advice to Novartis. Rod Carlton counselled the company on competition issues, while Paul Davison worked on the tax side of the deal.
Both firms were involved in setting up the original joint venture in 2014. The old deal entitled Novartis to exercise a put option that could oblige GSK to buy its stake (in whole or part) any time between March 2018 and March 2035. GSK said the new buyout plan removed this “inherent uncertainty” and was a better bet for the company’s capital planning.
GSK said it was contemplating the sale of its Indian consumer healthcare business and its healthcare nutrition brands, including malted milk drink Horlicks, to help fund the acquisition. The company, however, said that India “remains a priority market” for its pharmaceutical and vaccine businesses and added that it was currently building a new manufacturing facility in the country.
The Novartis acquisition comes four days after GSK pulled out of the bidding process for US drugmaker Pfizer’s consumer healthcare business, which is expected to fetch US$20 billion at auction. In the announcement of GSK’s withdrawal on 23 March, CEO Emma Walmsley said any acquisition the company undertakes “must meet our criteria for returns and not compromise our priorities for capital allocation.”
Counsel to GSK
- Slaughter & May
Corporate: partners David Johnson and Simon Nicholls and associates Alex Dustan, Edward Chapman, Warwick Brennand and Jack Wharton
Competition: partners Bertrand Louveaux and Jordan Ellison and associate Ying Wu
Financing: partners Guy O’Keefe and Oliver Storey and associates George Silber, Louis de Ste Croix and Oliver Ward
Tax: partner Dominic Robertson and associate Rose Swaffield
Counsel to Novartis
- Freshfields Bruckhaus Deringer
Corporate: partners Julian Long and Jennifer Bethlehem
Competition: partner Rod Carlton
Tax: partner Paul Davison