GSK sells North American brands to Prestige

GlaxoSmithKline has agreed to sell a clutch of North American non-prescription drugs for 426 million pounds ($660 million) to Prestige Brands Holdings, and remains in talks regarding the sale of similar European assets.
Britain's biggest drugmaker said on December 20 the sale of the over-the-counter (OTC) brands to Prestige would generate cash proceeds of 242 million pounds, which it will return to shareholders in 2012.
GSK first announced in February that it planned to sell non-core brands representing about 10 percent of its consumer health portfolio, and had hoped to divest them as a single block.
But markets have been difficult, given broader financial uncertainties, prompting it to look at piecemeal options as well in a long-running auction run by Goldman Sachs. Analysts initially said all the OTC products together might raise between 1.5 billion and 2 billion pounds, or three to four times annual sales.
In the event, the North American assets sold to Prestige fetched 3.2 times their 2010 sales of 134 million pounds but it remains to be seen if the other brands, with combined sales of some 400 million pounds, will get such a high price.
In particular, there are doubts about the willingness of buyers to take on diet pill Alli, which is the biggest single brand included in the mix. Alli was not included in the sale to Prestige.
Alli, which is a low-dose version of Roche's prescription drug Xenical, has been linked to rare cases of liver injury, raising the possibility of legal issues.
"Active discussions continue with other potential buyers for the remaining assets," Chief Financial Officer Simon Dingemans said in a statement.
The company gave no timescale for the disposal of the other OTC products and did not identify other parties that might bid.
Industry sources previously told Reuters that private equity group Bain Capital was looking at the assets, along with Blackstone, which at one stage had linked in a joint bid with Prestige. More recently, however, Blackstone lost interest in the joint approach with Prestige, sources said.
Despite the divestment, consumer healthcare will still remain a priority area for GSK. The company aims to focus its portfolio on top brands in Western markets and concentrate heavily on fast-growing opportunities in emerging markets.