* Analysts see drinks selling for more than 1 billion pounds
* GSK also to create division for older pharma products
* Q1 sales down 3 pct at 6.47 bln stg vs consensus 6.40 bln
* Core EPS 26.9p vs consensus 25.0p; full-year outlook held
By Ben Hirschler
LONDON, April 24 GlaxoSmithKline is to
sell soft drink brands Lucozade and Ribena in a move analysts
believe will raise over 1 billion pounds ($1.5 billion) and
focus its consumer health business on global products.
The plan was announced on Wednesday alongside first-quarter
results that saw sales at Britain's biggest drugmaker drop a
slightly smaller-than-expected 3 percent from a year ago.
GSK launched a strategic review of the two drink brands
earlier this year, ruling nothing in or out for their future.
Most analysts had focused on the idea of a sale, which is likely
to attract interest from private equity and trade buyers.
Chief Executive Andrew Witty told reporters there had been
significant interest in the products, though the decision to
pursue a sale was "subject to appropriate value realisation".
Japan's Suntory Holdings has been tipped as a
possible buyer after previously buying soft drinks maker
Orangina Schweppes for more than 300 billion yen ($3.0 billion)
and New Zealand's No. 2 beverage firm Funcor Group in 2009.
A Suntory spokeswoman declined to comment on the company's
potential interest but, when asked about a recent report that it
was in talks with banks about assembling a knockout bid, said:
"We don't acknowledge this report as factual."
Private equity firms are also hungry for deals and the
strong cashflows generated by Lucozade and Ribena could attract
the likes of Blackstone, BC Partners, PAI,
Lion Capital, Bain Capital, CVC Capital Partners and
Officials at the private equity houses declined to comment.
Lucozade and Ribena no longer fit well in GSK's portfolio,
since the company is focusing its consumer health operations
increasingly on emerging markets, where both brands are
Although GSK does not break out detailed sales for the two
products, they bring in nearly 600 million pounds a year, with
much of that generated in Britain.
Both are veteran products - Lucozade was launched in 1927
and Ribena introduced just 10 years later - but remain popular.
Assuming potential buyers are prepared to pay two times sales,
that would point to a valuation of some 1.2 billion pounds.
Analysts at Deutsche Bank said they believed the two brands
should bring in more than 1.5 billion pounds.
MATURE PRODUCTS SPIN-OFF?
GSK also said it was creating a new global established
products portfolio, consisting of around 50 medicines with
annual sales of some 3 billion pounds, including stomach acid
treatments Tagamet and Zantac, Imitrex for migraine, and
anti-nausea treatment Zofran.
Witty said placing these so-called "tail" products in a
division that would report separately from next January opened
various options, but he declined to say if the division might be
sold off at a later stage.
Jefferies analysts, however, said the formation of the
portfolio "looks like a precursor to a spin-off to us".
GSK's group sales in the first quarter fell 3 percent to
6.47 billion pounds, generating flat core earnings per share
(EPS) of 26.9 pence.
Analysts, on average, had forecast sales of 6.40 billion
pounds and core EPS, which excludes certain items, of 25.0p,
according to Thomson Reuters I/B/E/S.
The three months to end-March were always going to be tough,
due to a difficult comparison with a year earlier when GSK
booked revenue from over-the-counter products and an
incontinence drug that have since been sold.
GSK is expecting better times ahead as its pipeline starts
to deliver - and it reiterated its 2013 expectations for sales
growth, at constant exchange rates, of around 1 percent and core
EPS growth of 3-4 percent.
Witty is banking on a number of new drugs to revive its
fortunes in the next few years, including six that have already
been submitted for approval in lung disease, melanoma, diabetes
Hopes for its new drug pipeline received a boost last week
when a U.S. advisory panel recommended approval of Breo for
smoking-related lung damage. The Food and Drug Administration is
due to decide on the drug - a follow-on to GSK's top-seller
Advair - by May 12.
At 1230 GMT, GSK shares were little changed at 1,681 pence.