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GSK on track with consumer split as buyout report boosts shares

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(Reuters) – GlaxoSmithKline (NYSE:GSK) is “firmly on track” to spin off its consumer health business next year, the British drugmaker said on Tuesday, after Bloomberg News reported the unit could attract bids from private equity firms such as Advent, CVC and KKR.

The division, which makes Sensodyne toothpaste, and Advil and Panadol painkillers, could also draw interest from big pharmaceutical and consumer goods companies, the report said , citing unidentified people with knowledge of the matter.

It added the unit could be valued at 40 billion pounds ($54 billion) or more.

A GSK spokesperson declined to comment on whether the company had received takeover interest in the division, a joint venture with U.S. drugmaker Pfizer (NYSE:PFE).

The report sent London-listed GSK’s shares as much as 4.8% higher to 1,460.2 pence.

“GSK is far advanced with its plan for the separation of Consumer Healthcare,” the GSK representative said, adding the drugmaker was on course for the split in mid-2022.

The company set out plans in June to turn the consumer arm into a separately listed company to focus on its underperforming drugs business, and has defended those plans after activist investor Elliott suggested some changes including that GSK remained open to potentially selling the consumer business.

“The feedback we have received from our shareholders is that they are very keen to own the new Consumer Healthcare company as a listed entity through the demerger … The GSK board will fulfil its fiduciary duties to evaluate any alternative options,” GSK’s spokesperson said.

Under GSK’s plan, shareholders will receive stock in the new consumer health group amounting to at least 80% of the 68% stake that GSK currently owns in it. Pfizer owns the remaining 32%.

New GSK would sell the remaining 20% stake “in a timely manner,” the group has said. Pfizer has also said it would seek to exit its shareholding.

Elliott, which in July confirmed holding a significant stake in GSK, said then that a conservative estimate would value GSK’s shareholding in the consumer unit at about 34 billion pounds – working out to roughly 50 billion pounds overall.

Brokerage Jefferies (NYSE:JEF) has valued it at 45 billion pounds.

Another activist investor, Bluebell Capital Partners, which holds a smaller stake in GSK, said last month the consumer arm should attract interest from trade buyers and, potentially, private equity investors.

Elliott has said a sale of the unit to an industry peer would command a “meaningful premium” to its estimated value due to potential synergies of up to 10% of the business’s revenues.

Separately, Bluebell said in an open letter to GSK Chairman Jonathan Symonds dated Oct. 11, that both he and Chief Executive Emma Walmsley should be replaced, voicing disappointment over an Oct. 7 investor event.

“We completely reject the content and claims made in this letter, which are not representative of the discussion at the meeting or the majority of our shareholders’ views,” GSK said in response.

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