March 28, 2024

GlaxoSmithKline to Sell Off Drink Brands

The plan was announced on Wednesday alongside first-quarter results that saw sales at Britain’s biggest drugmaker drop a slightly smaller-than-expected 3 percent from a year ago.

GSK launched a strategic review of the two drink brands earlier this year, ruling nothing in or out for their future. Most analysts had focused on the idea of a sale, which is likely to attract interest from private equity and trade buyers.

Chief Executive Andrew Witty told reporters there had been significant interest in the products, though the decision to pursue a sale was “subject to appropriate value realisation”.

Japan’s Suntory Holdings has been tipped as a possible buyer after previously buying soft drinks maker Orangina Schweppes for more than 300 billion yen ($3.0 billion) and New Zealand’s No. 2 beverage firm Funcor Group in 2009.

A Suntory spokeswoman declined to comment on the company’s potential interest but, when asked about a recent report that it was in talks with banks about assembling a knockout bid, said: “We don’t acknowledge this report as factual.”

Private equity firms are also hungry for deals and the strong cashflows generated by Lucozade and Ribena could attract the likes of Blackstone, BC Partners, PAI, Lion Capital, Bain Capital, CVC Capital Partners and KKR.

Officials at the private equity houses declined to comment.

Lucozade and Ribena no longer fit well in GSK’s portfolio, since the company is focusing its consumer health operations increasingly on emerging markets, where both brands are relatively weak.

Although GSK does not break out detailed sales for the two products, they bring in nearly 600 million pounds a year, with much of that generated in Britain.

Both are veteran products – Lucozade was launched in 1927 and Ribena introduced just 10 years later – but remain popular. Assuming potential buyers are prepared to pay two times sales, that would point to a valuation of some 1.2 billion pounds.

Analysts at Deutsche Bank said they believed the two brands should bring in more than 1.5 billion pounds.

MATURE PRODUCTS SPIN-OFF?

GSK also said it was creating a new global established products portfolio, consisting of around 50 medicines with annual sales of some 3 billion pounds, including stomach acid treatments Tagamet and Zantac, Imitrex for migraine, and anti-nausea treatment Zofran.

Witty said placing these so-called “tail” products in a division that would report separately from next January opened various options, but he declined to say if the division might be sold off at a later stage.

Jefferies analysts, however, said the formation of the portfolio “looks like a precursor to a spin-off to us”.

GSK’s group sales in the first quarter fell 3 percent to 6.47 billion pounds, generating flat core earnings per share (EPS) of 26.9 pence.

Analysts, on average, had forecast sales of 6.40 billion pounds and core EPS, which excludes certain items, of 25.0p, according to Thomson Reuters I/B/E/S.

The three months to end-March were always going to be tough, due to a difficult comparison with a year earlier when GSK booked revenue from over-the-counter products and an incontinence drug that have since been sold.

GSK is expecting better times ahead as its pipeline starts to deliver – and it reiterated its 2013 expectations for sales growth, at constant exchange rates, of around 1 percent and core EPS growth of 3-4 percent.

Witty is banking on a number of new drugs to revive its fortunes in the next few years, including six that have already been submitted for approval in lung disease, melanoma, diabetes and HIV/AIDS.

Hopes for its new drug pipeline received a boost last week when a U.S. advisory panel recommended approval of Breo for smoking-related lung damage. The Food and Drug Administration is due to decide on the drug – a follow-on to GSK’s top-seller Advair – by May 12.

At 01:30 p.m. British time, GSK shares were little changed at 1,681 pence.

(Additional reporting by Anjuli Davies and James Topham; Editing by Kate Kelland and Mark Potter)

Article source: http://www.nytimes.com/reuters/2013/04/24/business/24reuters-glaxosmithkline-results.html?partner=rss&emc=rss

DealBook: Martha Stewart Living in Play

All anyone can seem to discuss this week is Oprah. But here at DealBook on Wednesday morning, we can’t stop talking about Martha.

Shares of Martha Stewart Living Omnimedia surged more than 20 percent on Wednesday after the company announced that it had retained Blackstone Advisory Partners to explore strategic partnerships.

Blackstone will “review and respond to various parties that have expressed interest in potentially partnering with or investing in the company,” the company said in a statement.

“As the founder and largest stockholder, I fully support this initiative to take our business and iconic brand to the next level,” said Martha Stewart, who also announced that she was rejoining the board of directors.

Ms. Stewart has continued to play a significant role in the company that bears her name after serving a prison sentence in 2005 for lying to federal investigators about a stock sale. She was banned for five years from serving as an officer or director at the company.

Along with the announcement that the company is in play, Martha Stewart Living named Lisa Gersh president and chief operating officer. Ms. Gersh, a co-founder of the women-focused television network Oxygen Media, joins the company from NBC, which acquired Oxygen in 2007. Martha Stewart Living, which has struggled to fill the ranks of its executive suite in recent years, said that Ms. Gersh would assume the chief executive post within the next 12 to 20 months.

The company has struggled in recent years amid a downturn in advertising and Ms. Stewart’s legal problems.

Even with the surge on Wednesday, Martha Stewart’s market capitalization is only about $250 million.

Article source: http://feeds.nytimes.com/click.phdo?i=d42ac03435d8dd68496551959455b533