GlaxoSmithKline GSK

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GlaxoSmithKline (GSK) has announced plans to merge its consumer health unit with that of rival drugs giant Pfizer, to create a Joint Venture with almost £10bn in annual sales.

The move will split GSK into two separately listed company, with the UK drugs giant taking a 68% controlling stake in the new entity.

It had previously been reported that the Aquafresh and Beechams maker was eying plans to split off its consumer healthcare arm.

GSK shares rose as much as 5.8% to 1,531.7p in early trading on the London Stock exchange.

The enlarged company will operate under the name GSK Consumer Healthcare and the Glaxo unit’s existing CEO, Brian McNamara, and its CFO, Tobias Hestler, will assume those roles in the joint venture. The transaction is expected to close in the second half of 2019.

The deal follows a period of M&A activity for GSK, who only last month revealed plans to buy drugmaker Tesaro Inc. for $5.1 billion, to expand in cancer medicines as it looked to improve its drug portfolio.

Earlier this month, it sold its Indian consumer business, including malted drink brand Horlicks, to Unilever for €3.3bn.

“Eighteen months ago, I set out clear priorities and a capital allocation framework for GSK to improve our long-term competitive performance and to strengthen our ability to bring new breakthrough medicines and better healthcare products to people around the world,” commented CEO Emma Walmsley.

“The transaction we have announced today is a unique opportunity to accelerate this work. Through the combination of GSK and Pfizer’s consumer healthcare businesses we will create substantial further value for shareholders.

“With our future intention to separate, the transaction also presents a clear pathway forward for GSK to create a new global Pharmaceuticals/Vaccines company, with an R&D approach focused on science related to the immune system, use of genetics and advanced technologies, and a new world-leading Consumer Healthcare company.

“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.”

Morning update

Elsewhere it has been a relatively quiet morning, with no other stock exchange announcements of note.

A number of retailers have led the way on the stock exchange this morning, with share prices jumping despite pessimism over the state of the high street.

Tesco (TSCO) has risen 1.4% to 197p, while Sainsbury’s (SBRY) has also made improvements, jumping 1.1% to 268.3p in early trading. Morrisons (MRW) is not far behind this morning, climbing 0.9% to 222.7p.

Other early risers this morning include Whitbread, up 0.8% to 4,480p, SSP Group (SSPG), up 0.6% to 638.9p and AG Barr (BAG), up 0.5% to 792p.

The FTSE 100 is equally positive this morning, rising 0.4% to 6,728pts in early trading following falls on Monday and Tuesday.

This morning’s early fallers include Fevertree drinks (FEVR), down 1.2% to 2,168p, Imperial Brands (IMB), down 1.2% to 2,288p, and Greencore (GNC), down 0.8% to 161.6p.

Yesterday in the city

The FTSE 100 has continued to have a tumultuous pre-Christmas week, slipping back 1.1% to 6,701p, following another 1.1% drop during Monday’s trading.

Retailers fared somewhat better yesterday, after a number of high street brands plunged by double-figures on Monday.

One food retailer to be impacted by the current malaise among high street retailers was Hotel Chocolat (HOTC), which dropped 4.3% to 280p.

Other notable grocery brands which underperformed, included Fevertree Drinks (FEVR), down 3.5% to 2,194p, British American Tobacco (BATS), down 2.1% to 2,574p, McBride (MCB), down 1.7% to 124.3p and WH Smith (SMWH), down 1.3% to 1,744p.

Despite announcing plans for its chairman Chris Holmes to step down in a year’s time, agriculture group Carr’s (CARR), jumped 3.1% to 148.5p.

Other risers included Total Produce (TOT), up 4% to 130p, Hilton Food Group (HFG), up 3.2% to 912p, PZ Cussons (PZC), up 2.2% to 215p, and Tesco (TSCO), up 2.1% to 194.2p.