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Novartis and GSK swap assets and launch joint healthcare venture

Three-part deal worth £13.7bn will see pharmaceutical giants swap assets and create new consumer healthcare division controlled by GSK

Manufacturers Novartis and GlaxoSmithKline (GSK) will swap parts of their businesses and combine their consumer healthcare divisions in a multi-billion-pound deal, it has been announced this week.

The three-part transaction will see GSK buy Novartis' vaccine business, apart from its flu drugs, for more than $7bn (£4.2bn) and sell the rights to its cancer drugs to Novartis for around $16bn (£9.5bn), the companies said.

The two manufacturers also plan to combine their consumer healthcare divisions to create a new business controlled by GSK, which will own 63.5 per cent. The joint venture will have estimated annual revenues of £6.5bn and control Novartis' portfolio of over-the-counter (OTC) brands, including anti-inflammatory drug Voltaren and nasal spray Otrivin, GSK said.

Novartis and GSK plan to combine their consumer healthcare divisions to create a new business controlled by GSK

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The deals are expected to be completed by the first half of 2015, if they are approved by GSK shareholders at a general meeting later this year. GSK estimated the transactions would increase its annual revenues by £1.3bn to £26.9bn and allow it to hand back £4bn to its shareholders.

The manufacturer also predicted it would make £1bn a year in savings by 2020, of which 20 per cent would be reinvested in the business.

The deals would further strengthen GSK's position as "the world's leading global vaccines supplier" by adding new meningitis B vaccine Bexsero to its portfolio, as well as more than 20 other vaccines still being developed by Novartis, GSK said.

GSK's manufacturing network would also be expanded to include Novartis' packaging and supply facilities in Italy and Germany and its manufacturing sites in India and China.

GSK chief executive officer Sir Andrew Witty said the new healthcare business would "substantially" strengthen both companies and create "significant new options" for shareholders.

"Opportunities to build greater scale and combine high-quality assets in vaccines and consumer healthcare are scarce. Together we will create the world's premier OTC business with clear opportunities to accelerate revenue growth," he said.

Novartis chief executive officer Joseph Jimenez said the deals were a "transformational moment" for his company and would "immediately" improve its financial strength.

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