GlaxoSmithKline shares are trading up 5.6 % at the time of writing after the drug maker announced three part deal with Swiss peer Novartis to swap and combine some of their key assets. Novartis shares also saw a lift, trading up 2.4%.
The two companies have agreed to combine consumer healthcare businesses with total 2013 revenues of £6.5 billion. GSK will have control with 63.5% ownership of the new business.
The second element is GSK acquiring Novartis' vaccines business, excluding influenza, for $5.25bn plus royalties and the payment of a further $1.8bn if certain milestones are hit.
The final of the three elements is GSK will sell its oncology assets and future partner rights to Novartis for $16bn. Of this cash £4 billion is set to be returned to GSK shareholders via a B share scheme.
Sir Andrew Witty, GSK's CEO said the transaction accelerates its strategy to generate sustainable, broadly sourced sales growth and improve long-term earnings. "With this transaction we will substantially strengthen two of our core businesses and create significant new options to increase value for shareholders,” he added.
This follows news over the Easter weekend that US drug giant Pfizer has approached AstraZeneca regarding a possible £60bn takeover. A deal would create a top ten global company by market value. Reports have indicated AstraZeneca rebuffed the approach and the company is yet to comment on the matter however its shares are trading up more than 7% on the news at the time of writing.
Analyst views on the probability of a successful transaction are mixed with some citing the track record of major pharma deals creating little value and major disruption as a reason to be sceptical. Others point to Pfizer’s desire to grow in certain key areas where AstraZeneca is strong such as immunotherapy as a rational for Pfizer to push for a deal.
Major shareholders in Glaxo include BlackRock, Invesco, Legal & General, Norges Bank Investment Management, Scottish Widows Investment Partnership and M&G Investment Management. Astrazeneca’s top shareholders also include BlackRock, Invesco Asset Management, Legal & General and Scottish Widows as well as Capital Research & Management Co, Wellington Management, Schroder Investment Management and the Vanguard Group.
Positive sentiment also carried over from the end of last week when a number of big UK financial stocks including Barclays, Lloyds and RSA made significant gains and US employment figures beat market expectations.
