) announced its decision to increase its holding in its
pharmaceuticals subsidiary in India from 50.7% to up to 75%.
Glaxo plans to increase its stake through a voluntary open offer.
The offer, worth approximately £629 million, represents a premium
of about 26% over the market price of the Indian subsidiary
(closing price as on Dec 13, 2013 in the local stock exchange).
Glaxo plans to initiate the offer in Feb 2013, subject to the
fulfillment of certain regulatory conditions.
The deal will not have any impact on earnings in the first year,
but will be accretive thereafter. Glaxo plans to fund the deal
with its existing cash resources and remains on-track to buy back
shares (£1 billion to £2 billion) in 2013.
The Indian pharmaceuticals subsidiary commercializes
pharmaceuticals and vaccines targeting several therapeutic areas
including respiratory, cardiovascular, oncology, anti-infectives
and dermatology. The subsidiary generated revenues of
approximately £313 million in 2012. The deal is in line
with the company's plans to expand its pharmaceuticals segment in
emerging markets and looks good to us.
We remind investors that in February this year, Glaxo announced
that it had increased its stake in its consumer healthcare
subsidiary in India from 43.2% to up to 72.5%. Glaxo increased
its holding through an open offer which was initially announced
in Nov 2012. The offer was worth approximately £568 million.
Glaxo carries a Zacks Rank #3 (Hold). We are concerned about the
loss of revenues in the third quarter due to investigation in
China regarding fraudulent behavior and ethical misconduct. We
are also disappointed with pipeline setbacks for two late stage
candidates (drisapersen and darapladib). Meanwhile, Glaxo
continues to face challenges in the form of EU pricing pressure
and generic competition. We expect recent approvals,
restructuring and cost-cutting efforts to offset some of the
Some better-ranked stocks include
Vanda Pharmaceuticals, Inc.
Forest Laboratories Inc.
). All these companies hold a Zacks Rank #1 (Strong Buy).
ACTELION LTD (ALIOF): Get Free Report
FOREST LABS A (FRX): Free Stock Analysis
GLAXOSMITHKLINE (GSK): Free Stock Analysis
VANDA PHARMACT (VNDA): Free Stock Analysis
To read this article on Zacks.com click here.