GSK initiates voluntary open offer to increase stake in its pharmaceuticals subsidiary in India

GlaxoSmithKline (GSK) (LSE: GSK) today announced a Voluntary Open Offer (the “Offer”) to increase its stake in its publicly-listed pharmaceuticals subsidiary in India (GlaxoSmithKline Pharmaceuticals Limited, the “Company”) from 50.7% to up to 75% at a price of INR 3,100 per share. Securities regulations in India require a minimum public shareholding of 25% for a company to maintain a public listing in the country. GSK intends to keep the Company publicly-listed.

The Offer, which is made pursuant to the rules of the Securities and Exchange Board of India (SEBI), is to acquire up to 20,609,774 shares, representing 24.3% of the total outstanding shares of the Indian Company. The Offer represents a premium of approximately 26% to the Company’s closing share price on the National Stock Exchange of India Ltd (NSE) on 13 December, 2013. This closing price represents an appreciation of 19% over the last 12 months. The potential total value of the transaction at the Offer price is approximately INR 64 billion or £629 million.

David Redfern, Chief Strategy Officer, GSK said: “For GSK this transaction will increase exposure to a strategically important market and for our Indian pharmaceuticals subsidiary’s shareholders we believe it offers a good liquidity opportunity at an attractive premium.

“GSK has a proud heritage in India. Today’s announcement is a further demonstration of our long-term commitment to the country having increased our holding in our consumer business earlier this year and more recently committed to a significant manufacturing investment.”

The transaction will be funded through GSK’s existing cash resources, will be earnings neutral for the first year and accretive thereafter and will not impact expectations for the Group’s long-term share buyback programme.

GSK’s Indian pharmaceuticals subsidiary manufactures, distributes and commercialises pharmaceuticals and vaccines across multiple therapeutic areas including respiratory, cardiovascular, oncology, anti-infectives and dermatology. The Company employs more than 5,000 people across its operations and generated more than INR 26 billion turnover in the financial year ended 31 December 2012 (approximately £313 million at 2012 average exchange rates).

The Company’s profit before tax in the financial year ended 31 December, 2012 was approximately INR 9.8 billion (approximately £116 million at 2012 average exchange rates) and approximately INR 5.6 billion after tax and exceptional items (approximately £66 million at 2012 average exchange rates).

Subject to regulatory clearance, the Offer period is expected to begin in February 2014. Payment for the shares will take place shortly after close of the Offer. The Company’s shares are traded on the Bombay Stock Exchange Ltd (Scrip Code: 500660) and the NSE (Symbol:GLAXO).

The details of the Offer can be found in the public announcement which will shortly be available at www.sebi.gov.in, www.bseindia.com, and www.nseindia.com, and the detailed public statement and letter of offer which will be filed in connection with the Offer with SEBI and the relevant stock exchanges.

The Offer is being managed by HSBC Securities and Capital Markets (India) Private Limited.