Breaking Up Of Group Being Considered By GlaxoSmithKline: FT Report

A recent report published in the Financial Times claimed that a break-up of the group is being seriously considered by GlaxoSmithKline Plc. The consideration follows pressure on the company’s board by investors to spin off the consumer division of the company claims the news report.

The Financial Times report claimed. quoting sources in the company, that the creation of a standalone pharma and vaccines company in the medium term is being discussed by GSK Chairman Philip Hampton and some of the biggest shareholders of the group. The report further said that it can be two or three years that the move could actually be put into action.

The news report quoted one of the ten largest shareholders of the company – which was not named in the report, about confirming the talks and discussions with the GSK chairman and the investor added that shareholders “don’t quite believe in the company.”

Putting up the argument that a break up of the company would solidify value for the component business and that there are low levels of synergy between the consumer business and its pharma division, calls for splitting up of the group have been made by investors for quite some time.

A spokesperson for GSK said that the company’s focus was to enhance the performance of its pharmaceutical division – especially in terms of research and development. It is expected that the company would highlight and detail its new approach for the division to the public and the investors next week.

The company spokesman said in a statement that the company’s “3 business structure” gives stability to the revenues and earnings of the company and aids in the maintenance of an adequate level of cash flow generation.

“But as we have consistently said this is subject to each business continuing to perform competitively and having access to capital. We are pleased to have completed the buyout of the Consumer Healthcare business for which we see very good potential for growth and have set an increased margin target for that business to achieve by 2022,” according to the statement.

The group had earlier announced in April this year that it would be divesting the rare disease gene therapy drugs into a private biotech company Orchard Therapeutics.

(Adapted from Reuters.com)

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