* Prestige buys over-the-counter brands for $660 mln
* GSK continuing sale process for non-N.American products
* GSK shares slip 0.7 percent, Prestige jumps 16 pct
(Adds comment from analyst, details, background)
By Paul Sandle
LONDON, Dec 20 GlaxoSmithKline has
agreed to sell a clutch of North American non-prescription drugs
for 426 million pounds ($660 million) to Prestige Brands
Holdings, and remains in talks regarding the sale of
similar European assets.
Britain's biggest drugmaker said on Tuesday the sale of the
over-the-counter (OTC) brands to Prestige would generate cash
proceeds of 242 million pounds, which it will return to
shareholders in 2012.
GSK first announced in February that it planned to sell
non-core brands representing about 10 percent of its consumer
health portfolio, and had hoped to divest them as a single
But markets have been difficult, given broader financial
uncertainties, prompting it to look at piecemeal options as well
in a long-running auction run by Goldman Sachs.
Analysts initially said all the OTC products together might
raise between 1.5 billion and 2 billion pounds, or three to four
times annual sales.
In the event, the North American assets sold to Prestige
fetched 3.2 times their 2010 sales of 134 million pounds -- but
it remains to be seen if the other brands, with combined sales
of some 400 million pounds, will get such a high price.
In particular, there are doubts about the willingness of
buyers to take on diet pill Alli, which is the biggest single
brand included in the mix. Alli was not included in the sale to
Alli, which is a low-dose version of Roche's
prescription drug Xenical, has been linked to rare cases of
liver injury, raising the possibility of legal issues.
"Active discussions continue with other potential buyers for
the remaining assets," Chief Financial Officer Simon Dingemans
said in a statement.
The company gave no timescale for the disposal of the other
OTC products and did not identify other parties that might bid.
Industry sources previously told Reuters that private equity
group Bain Capital was looking at the assets, along with
Blackstone, which at one stage had linked in a joint bid
with Prestige. More recently, however, Blackstone lost interest
in the joint approach with Prestige, sources said.
Trade players including German groups Bayer,
Sanofi and Boehringer Ingelheim have also shown
interest in specific parts of the portfolio.
Brian White, an industry analyst at Shore Capital, said GSK
had managed to get a respectable price from Prestige that was in
line with his forecasts, underscoring solid demand for OTC
remedies, which tend to sell well even in tough economic times.
"Most people recognise consumer health assets are quite
attractive," he said.
GSK said it expected to complete the sale of brands to
Prestige -- including painkillers like BC and Goody's, as well
as Beano, Ecotrin, Fiber Choice and Tagamet -- in the first half
of next year.
Despite the divestment, consumer healthcare will still
remain a priority area for GSK. The company aims to focus its
portfolio on top brands in Western markets and concentrate
heavily on fast-growing opportunities in emerging markets.
Shares in GSK traded down 0.8 percent by 1515 GMT, lagging
Britain's blue-chip index which up 0.7 percent, while
Prestige gained 16 percent.
(Additional reporting by Sarah Young; Editing by Ben Hirschler)