GSK Share Price: Ribena and Lucozade to Be Sold for £1.35 Billion

on Sep 10, 2013
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iNVEZZ.com Tuesday, September 10th: GlaxoSmithKline (LON:GSK) yesterday announced that it would sell its Lucozade and Ribena drinks brands to Suntory Beverage & Food Ltd (TYO:2587) for £1.35 billion.

The cash deal will yield net proceeds of some £1.3 billion after tax, fees and costs for GSK, which the company will use to cut debt and for general corporate purposes. Some shareholders who had hoped that GSK would use the proceeds to pay a special dividend, might be disappointed, Reuters noted. For Suntory, Japan’s second-largest drinks maker by sales, the acquisition of the two drinks brands will bring a business with annual sales of about £500 million.

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Lucozade and Ribena, introduced in 1927 and 1937 respectively, are “iconic brands that have made a huge contribution to GSK over the years”, David Redfern, chief strategy officer at GSK, said, as quoted by The Times. “Now is the right time to sell them as we increase the focus of our Consumer Healthcare business and execute the delivery of our late stage pipeline of pharmaceuticals and vaccines,” he added.

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In April, GSK put up for sale the energy and blackcurrant drinks which are popular in Britain but lack global reach, particularly in the big emerging markets where GSK is focusing its consumer health business. Suntory has said it expected the acquisition of the two drinks brands focused on the British market would help it compensate for sluggish sales in Japan.

As The Times noted, Suntory has won the deal in competition with CVC Capital Partners, KKR and a joint move by Blackstone and Lion Capital. According to industry analysts, the high price was justified because the Japanese company known for its beer and Yamazaki whisky will add two strong brands to its portfolio and distribution channels that it could use to enter emerging markets.

“One of Suntory’s main rating constraints has been its geographic concentration as about 80 percent of sales comes from domestic sources. Acquiring these UK brands will improve its geographic diversification,” Reuters quoted Moody’s Investors Service as saying in a note before the deal was announced.
According to a GSK spokesman, in addition to the price offered, Suntory’s bid was also considered attractive because it would help protect British jobs. About 700 employees will move to Suntory, including 500 workers at the Coleford factory in the Forest of Dean in Gloucestershire.
The deal is expected to be completed by the end of 2013.
!m[British Company Increases Focus on Consumer Healthcare Business ](/uploads/story/5362/thumbs/pic1_inline.jpg)
The Ribena brand, a blackcurrant concentrate, was initially distributed as a vitamin C supplement in hospitals, nursing homes and schools during the Second World War. Lucozade, initially launched as Glucozade, was sold as a drink for sick children before being rebranded as an energy drink in the 1980s.
Morgan Stanley acted for Suntory on the acquisition, while JP Morgan and Greenhill advised GSK.
GSK share price yesterday fell by 4.9p to £1,646p.
**As of 08:42 BST on September 10 buy GSK shares at 1,592p.**
**As of 08:42 BST on September 10 sell GSK shares at 1,590p.**

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