GSK Remains Open To Consumer Healthcare Sale As It Prepares To Name CEO
Executive Summary
Responding directly to a call from an activist investor to consider selling Consumer Healthcare, GSK says it will evaluate any acquisition proposals it receives. A six-month long process to appoint a CEO to lead the new standalone OTC business is also nearing its conclusion.
GlaxoSmithKline plc has insisted it remains open to selling its Consumer Healthcare business after a major investor called into question the firm’s plan to spin-off and list the unit.
Activist hedge fund Elliott Management recently wrote to the UK-based pharma giant’s board of directors arguing that the sale of Consumer Healthcare, rather than GSK’s demerger plan, had the potential to generate “substantial proceeds.”
Responding directly to Elliott’s 17-page letter – which took issue with numerous facets of the company’s strategy – GSK’s board said given its “strong focus on maximising shareholder value” it would “evaluate any alternative options for Consumer Healthcare that may arise.”
However, the value of any acquisition proposal would have to be weighed against the “opportunity cost for shareholders” of no longer being able to benefit from the future growth and value accretion of Consumer Healthcare as a listed company, GSK explained. The board would also take into account any additional tax or other frictional costs compared to the demerger option.
While Elliott was not in favor, the demerger structure was supported by a “significant proportion of shareholders,” GSK noted, who wished to own shares in Consumer Healthcare “given its strong prospects for sustainable sales and profit growth, high cash generation and the expectation that it will deliver attractive returns.”
CEO Announcement Expected
Alongside criticisms of the demerger plan, Elliott also took issue with GSK’s procedure for appointing a CEO to lead the new Consumer Healthcare business.
Elliott's letter called for a “new, fit-for-purpose” GSK board, including executives with OTC experience, to be created to “run robust processes” for selecting a CEO, considering both internal and external candidates.
Responding to this point, GSK revealed that its board had conducted an “extensive search and selection process” to appoint a CEO designate for Consumer Healthcare. Over a six-month period, the firm had evaluated and interviewed “several external and internal candidates.” The process was now nearing completion, GSK said, with the identity of the successful candidate set to be announced “in due course.”
Furthermore, GSK said it would later this year name a chair of the board for the new business. This chair would then lead the appointment of the board of the directors, which will “include the appropriate mix of skills and experience to represent and maximize the value of this business for shareholders.”
Summing up its position, GSK said the priority of its long-term strategy – outlined at a recent investor event – was to deliver step-change in growth and performance and create shareholder value. (Also see "GSK To Spin Off And List Consumer Healthcare Business In 2022" - HBW Insight, 24 Jun, 2021.)