GlaxoSmithKline share price down, halves its stake in Aspen Pharmacare

GlaxoSmithKline announced on Friday that it had disposed of around half of its take in South Africas largest generic drugmaker as a part of the companys turnaround plan.

GSK said it had sold about 6.2% of its stake in Aspen Pharmacare Holdings, reflecting Chief Executive Sir Andrew Wittys latest attempt to spur growth at Britains largest drugmaker.

The company said it had entered a share placing agreement with UBS and Citigroup for about 28.2 million Aspen shares, which brought the company an offer to sell its share at a ZAR 372 per share to a total of ZAR 10.5 billion(£574 million). Additionally, GSK said that it would not dispose of anymore Aspen shares of its remaining 6.2% stake within a period of 180 days.

Chief Financial Officer Simon Dingemans said in a statement that the proceeds would be used to optimize the “financial flexibility” of the company following the asset-swap deal with Switzerlands Novatris.

The deal was aimed at diversifying GSKs portfolio of products after a sharp drop in sales of the companys top performing drug, the anti-asthma Advair drug. Under the deal GSK would received Novatris vaccines business while also boosting its position in consumer healthcare via a joint venture with the Swiss drugmaker.

In 2009 GSK reached a deal with Aspen to acquire a 16% stake in the South African company in exchange for some of GSKs medicines and manufacturing assets. Additionally, the company boosted its stake in Aspen to around 19% between the signing and the completion of the agreement. During that time Aspen shares were trading at around ZAR 69.59

In 2013 GSK sold the same number of shares for ZAR 7 billion (£429m). In the latest deal GSK sold Aspen shares at a 8.5% discount to their closing price on Thursday, which reflected in a 5% drop in Aspens shares price on Friday to ZAR 385.

“We have decided now is the right time to realise further value from this successful relationship. We continue to believe in the strategy of Aspen and we remain committed to working together in the future.” Mr. Dingemans said.

GlaxoSmithKline gained 1.94% on Thursday and closed at GBX 1 548.5 in London. On Friday the stock was trading 0.25% lower to GBX 1 544.63 at 10:05 GMT, marking a one-year decrease of 5.73%. The company is valued at £73.90 billion.

According to the Financial Times, the 24 analysts offering 12-month price targets for GSK have a median target of GBX 1 545, with a high estimate of GBX 1 810 and a low estimate of GBX 1 250. The median estimate represents a 0.23 % decrease from the last closing price.