The British pharmaceuticals giant GlaxoSmithKline plans to combine its consumer-health business into a joint venture with its US rival Pfizer to create a medical superpower.
The deal could forge the largest provider of medicinal products sold directly to the public in the world.
The move means that GSK will split into two businesses going forward.
Two of the world’s largest pharmaceuticals companies are set to merge in a joint venture that could have combined sales of nearly $10 billion.
GlaxoSmithKline plans to combine its consumer-health business with Pfizer — split at 68% to 32% in equity holdings respectively — and its shares rose as much as 7.4% on the announcement. GSK was trading up 7.2% as of 10 a.m. in London (5 a.m. EST).
The companies say they will have a joint market share far exceeding that of rivals such as Johnson & Johnson, Sanofi, and Bayer.
Integrating the two businesses should bring annual savings of £500 million ($633 million) by 2022, with total costs of £1.2 billion, and is expected to be completed by the second half of next year, the companies said.
It marks a continuation of GSK’s dealmaking after it bought the Swiss drugmaker Novartis out of its minority stake in its combined consumer-health business, while earlier this month the company bought the US oncology-focused firm Tesaro for $5.1 billion.
“In the short-term, teaming up with Pfizer means GSK will become over the counter market leader in pretty much all major geographies around the world, and the partnership should bring significant cost savings too,” said George Salmon, an equity analyst at Hargreaves Lansdown.
“Still though, all deals can be made to look good on paper — the challenge will be delivering smooth execution of those planned savings.”
GSK intends to separate its consumer business from its UK stock-exchange listing within three years of the deal, splitting the company into two separate businesses.
“Ultimately, our goal is to create two exceptional, UK-based global companies, with appropriate capital structures, that are each well positioned to deliver improving returns to shareholders and significant benefits to patients and consumers,” said GSK’s chief executive, Emma Walmsley.
The Glaxo-Pfizer deal comes on a huge day for the pharmaceutical industry after Bloomberg reported that General Electric’s healthcare business had confidentially filed for an IPO.