GlaxoSmithKline (NYSE:GSK) will sell 17 of its over-the-counter products to Prestige Brands Holdings (NYSE:PBH) in a $660 million cash deal that sheds North American rights to GSK brands such as heartburn drug Tagamet, pain reliever Ecotrin and digestive aid Beano.
The deal is expected to close in the first half of 2012. When complete, it will be the largest acquisition in Prestige Brands’ history and it is expected to push the Irvington, New York company’s revenue to more than $600 million, 85 percent of that coming from OTC products. The deal also gives Prestige Brands a presence in two new categories: adult aspirin-based analgesics and gastrointestinal products.
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GSK is not done looking for buyers. The London-based pharmaceutical company, which has its U.S. headquarters in Research Triangle Park, North Carolina, wants a buyer to acquire the OTC rights for the products outside of North America. GSK is also still shopping the global rights for weight-loss drug alli. All of these brands are sold primarily in Europe and the United States.
GSK announced in February that it would sell some of its OTC products to streamline its consumer healthcare business and focus that operation on “priority brands and markets.” In April, the company identified the products it would sell and set a goal for selling the products by the end of 2011. Private equity firms were believed to be in the lead to acquire the GSK brands with Bain Capital and The Blackstone Group mentioned by observers as leading bidders. Prestige Brands’ stable of OTC products has been growing by acquisition and includes Chloraseptic sore throat treatment and eye care product Clear Eyes. Before today’s announcement, Prestige Brands’ most recent acquisition was a $76 million deal to acquire motion sickness drug Dramamine from Johnson & Johnson (NYSE:JNJ) McNeil-PPC, a deal that was announced about a year ago.
GSK had wanted to sell all of the OTCs together and those efforts might have been hurt by alli, which in 2009 fell under a U.S. Food and Drug Administration probe checking whether the product causes liver damage. Last year, GSK updated the drug’s label to reflect the potential for health risks, including severe liver injury. But alli’s higher risk and declining sales might be scaring off bidders.
GSK is not exiting the entire consumer space. The company has said its efforts will now focus on oral health, over-the-counter wellness products and nutrition.
