GlaxoSmithKline May Bid $15B for Pfizer Consumer Healthcare Unit

GlaxoSmithKline Plc is to bid more than $15 billion for the consumer healthcare business of U.S. rival Pfizer Inc (PFE), people familiar with the situation said on Friday.

The move raises the bar in the auction for the $3.88-billion-a-year over-the-counter (OTC) medicines unit, whose top-selling brands include Listerine mouthwash, Sudafed decongestant and Rolaids antacid.

Previously, analysts had estimated the business would sell for around $14 billion, or 3.6 times 2005 sales, similar to the multiple paid by Reckitt Benckiser Plc for Boots Healthcare International last year. Glaxo lost out in that sale.

Industry sources told Reuters on Thursday that Glaxo, along with Johnson & Johnson (JNJ) and Reckitt, had emerged as frontrunners to acquire the Pfizer business after the chief executive of Colgate-Palmolive Co (CL) played down talk of its interest.

Final bids for the division are due on June 6.

A bid of more than $15 billion from Glaxo, first reported in the Financial Times, would underscore the value that consumer health companies put on a prize asset in a fast-consolidating sector.

If successful, it would secure Glaxo's position as the world's leading supplier of non-prescription medicines -- a growth sector being encouraged by many governments who see it as a way to increase patient choice and cut state healthcare bills.

But competition in the auction is expected to be intense.

"I think this is going to be a very competitive sale process. It's not clear if this will be a knock-out bid or not," said one person close to the matter.

Glaxo Chief Executive Jean-Pierre Garnier said last month that Europe's biggest drugmaker was looking at ways to build up its OTC operations but a company spokesman declined to comment on Friday on its specific interest in the Pfizer unit.


Glaxo shares fell 0.7 percent to 14.86 pounds by 0900 GMT, among the biggest losers in the FTSE 100 index as investors worried it could overpay. The FTSE 100 was up 0.6 percent.

Analysts at Dresdner Kleinwort Wasserstein, however, said they believed a deal at $15 billion would be earnings neutral in the second year and Paul Diggle of Nomura Code said there may be considerable scope for Glaxo to reduce costs.

"Strategically, it is a good deal," Diggle said. "Given that Glaxo have got a pretty big U.S. infrastructure already, there could be quite good scope for taking costs out."

Despite its size, adding the Pfizer business to Glaxo's large established consumer health division -- which had sales of 3.0 billion pounds ($5.6 billion) in 2005 -- would create few product overlaps or antitrust issues, analysts said.

The one area where some disposals would probably be needed is non-prescription smoking cessation products.

Other companies, including Bayer AG and Wyeth (WYE), are still mulling their involvement in the auction, the sources said. But Novartis AG, which entered a first-round bid, has dropped out of the running, they added.

All the companies involved have declined comment.

Pfizer first announced in February it was weighing spinning off the business to shareholders in a tax-free transaction, or selling it, which would trigger a hefty tax bill. Analysts believe a price of $15 billion would be high enough to offset the pain of a tax bill.