Pfizer’s €16bn OTC sale in doubt as GSK and Reckitt pull out of auction

By Nathan Gray

- Last updated on GMT

iStock / pichet_w
iStock / pichet_w
The race to buy Pfizer’s OTC business – including Advil painkillers and Centrum vitamins – may have collapsed after both GlaxoSmithKline and Reckitt Benckiser officially walked away from the auction within days of each other.

Just two days after Reckitt Benckiser’s departure from the bidding process seemed to leave the way clear for hot favourite GlaxoSmithKline to snap up Pfizer’s OTC business, the whole sell off has been thrown into serious doubt after GSK itself left the bidding process today.

With a reported $20 billion (€16bn) wanted by Pfizer for the unit, the high cost of the business and distinct differences in valuation had already reportedly been responsible for the exit of major global companies in the pharmaceutical and nutrition space including Merck, Nestlé, Johnson & Johnson and Perrigo.

Sale in doubt: A recap of the week

On Wednesday this week (21/03), UK-based multinational Reckitt Benckiser announced it had ended talks with Pfizer because it did not want to acquire the whole division – with Pfizer seemingly unwilling to sell just part of the company.

A statement from Reckitt Benckiser chief executive Rakesh Kapoor said the company approached potential takeovers ‘in a rigorous, disciplined, and financially responsible manner’ – but noted that "an acquisition for the whole Pfizer consumer health business did not fit our acquisition criteria."

That seemingly left the road clear for GlaxoSmithKline (GSK) as seemingly the only major company still in the race. However, Friday brought fresh doubt on the whole sale as GSK then announced it was also stepping away from the deal.

“While we will continue to review opportunities that may accelerate our strategy, they must meet our criteria for returns and not compromise our priorities for capital allocation,”​ GSK Chief Executive Emma Walmsley said in a statement.

A matter of timing?

Reuters noted that while the Pfizer business unit is seen as attractive, the sale has come at a bad time – when major companies like GSK and Reckitt are under shareholder pressure to exercise financial discipline and other potential suiters have other major projects.

Indeed, recent data from Morgan Stanley which suggests a slowing of the global consumer health market will not help matters either. In December analysts said consumer health markets have slowed from 4-6% like-for-like sales growth to 0-3% growth.

Shares in both GSK and Reckitt Benckiser rose immediately after respective announcements that the companies will leave the bidding process, while Pfizer said it will continue to look at potential alternatives for the business.

Such ‘alternatives’ may include a spin-off, sale or other transaction, as well as retaining it, according to Reuters sources.

“We have not yet made a decision, but continue to expect to make one in 2018,”​ a Pfizer spokesperson said.

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