GlaxoSmithKline PLC (NYSE: GSK) shares bounced higher on Wednesday after the company announced a new joint venture with Pfizer Inc. (NYSE: PFE). These two firms will create a premier global consumer health care company combining their robust iconic brands.
The boards of directors of both companies have unanimously approved the transaction under which Pfizer will contribute its consumer health care business to GlaxoSmithKline’s existing consumer health care business. The 2017 global sales for the combined business were roughly $12.7 billion.
Under the terms of the transaction, Pfizer will receive a 32% equity stake in the joint venture, entitling Pfizer to its pro rata share of the joint venture’s earnings and dividends, which will be paid on a quarterly basis. Pfizer will have the right to appoint three out of the nine members of the joint venture’s board.
The transaction is expected to deliver $650 million in peak cost synergies and to be slightly accretive for Pfizer in each of the first three years after the close of the transaction, which is expected during the second half of 2019.
According to the release:
Following the integration of the combined business, GSK intends to separate the joint venture as an independent company via a demerger of its equity interest to its shareholders and a listing of the Consumer Healthcare business on the UK equity market. GSK will have the sole right to decide whether and when to initiate a separation and listing for a period of five years from closing of the proposed transaction. GSK may also sell all or part of its stake in the joint venture in a contemporaneous IPO.
The joint venture will be a category leader in pain relief, respiratory health, vitamin and mineral supplements, digestive health, skin health and therapeutic oral health and will be the largest global consumer health care business. Also, this joint venture will operate globally under the GSK Consumer Healthcare name.
Shares of GSK were last seen trading up over 3% at $38.40 on Wednesday, with a consensus analyst price target of $42.87. The stock has a 52-week trading range of $34.89 to $42.36.
Pfizer traded at $42.47 a share, in a 52-week range of $33.20 to $46.47. The consensus price target is $44.78.