September 1, 2011 8:30 pm

GSK sale of non-core assets advances

GlaxoSmithKline has taken a group of private equity funds and strategic bidders through to a second round of the sale of its non-core over-the-counter products, estimated to be worth £1.5bn ($2.4bn).

People familiar with the situation said that US buy-out funds Bain Capital, Blackstone and German pharmaceutical group Boehringer Ingelheim were still in the process.

One person with knowledge of the process said that at least three bidders were through to a second round. The British pharmaceutical company declined to comment on the number or names of the bidders through to its second round but confirmed that first-round bids had been due on August 8 and the sale is expected to close by year end.

Other private equity funds such as Thomas H Lee are understood to have expressed an interest in the auction, along with other strategic bidders including Bayer and Brussels-listed pharmaceutical company Omega Pharma. However, it is not clear whether any are still involved in talks.

All parties declined to comment.

Final-round bids are expected to be tendered at the end of September or early October, one of the people said.

Bain is expected to be interested in a bid for the whole business, although some of the other interested parties may only want parts of it. The process, being run by Goldman Sachs, is said to be complicated by the fact that it involves a long list of diverse drugs.

In April, GSK identified a group of 19 non-core brands – including weight management drug Alli, sleep aid Nytol and analgesics brand Solpadeine – to be divested so it could focus its consumer healthcare business around a portfolio of fast-growing priority brands and the emerging markets.

The products to be divested, which are primarily sold in Europe and the US, had sales in 2010 of approximately £500m, 10 per cent of GSK’s total consumer healthcare turnover.

Buyers were likely to apply a multiple of three times sales to their offer, suggesting bids of about £1.5bn, one of the people said.

Following the divestment, GSK said its consumer healthcare business will focus on three priority categories: oral health, wellness/OTC and nutrition, which include brands such as Sensodyne, Panadol and Horlicks.

On a pro forma basis, the retained business delivered sales of approximately £4.5bn in 2010, and grew at 6 per cent compound annual growth rate over the period 2007-10.

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