Glaxo Considers OTC Sale

GlaxoSmithKline (GSK) is facing mounting pressure from shareholders to sell its over-the-counter medicines business (OTC). Analysts believe the business, which makes brands such as Ribena, Lucozade and Panadol, could fetch between Gbp9 and Gbp12bn.

Investors are unhappy with the lack of progress in the group's share price, which is trading at early 2005 levels having fallen 10% since May, in the midst of a safety scare around diabetes drug Avandia.

The Times of London cited one shareholder as saying the group is “wide open” to receive a letter similar to that sent to Vodafone last week by a hedge fund, calling for greater returns to investors.

If past experience is anything to go by, a sale of GSK's OTC unit would attract a host of strategic and financial bidders. In 2006, listed Croatian generic drugs manufacturer Pliva accepted a takeover offer by its US-based peer Barr for a total of about HRK13bn (US$2.2bn following a fierce bidding contest involving Iceland's Actavis Group.

That was the largest transaction in the sector since 2005, when Switzerland's Novartis acquired generics drugs producer Eon Labs in the US for US$2.5bn and Hexal in Germany for US$5.7bn to merge them into its Sandoz division.