GlaxoSmithKline Turns Focus on Emerging Markets, Ups Stake in Indian Arm

Edited By Vani Rao

Shells out $1 billion to increase its stake to 75%

Pharmaceutical giant GlaxoSmithKline PLC (NYSE: GSK) is turning its focus on the emerging markets as it hopes to cash in on the growing demand for pharmaceutical products in these regions as their middle-classes grow. To this effect, the UK-based drug maker increased its shareholding in its Indian entity, GlaxoSmithKline Pharmaceuticals Ltd., from 50.7% to 75%, as per the company statement in a press release dated 10 March 2014.

b1GlaxoSmithKline’s Indian arm successfully closed a $1 billion, or R64 billion, open offer, where GlaxoSmithKline PLC accepted 20,609,774 shares, representing 24.33% of the total shares outstanding at I3,100 per share. The open offer commenced on February 18, 2014 and closed on March 5, 2014. The offer price of INR3,100 per share values the deal at about £625 million.

The open offer was announced on December 16, 2013 and was managed by HSBC. The final payment for shares tendered and accepted will be completed by March 20, GlaxoSmithKline PLC added. David Redfern, GSK’s Chief Strategy Officer, stated that the decision to increase exposure to the Indian market was “a significant vote of confidence” in growth prospects for its business in India. The news resulted in a slight uptick of the stock against the S&P 500 on 11 March 2014 as shown below.

Source: Bloomberg
Source: Bloomberg

GlaxoSmithKline PLC has its presence in India for roughly 90 years and is keen to gain a larger slice of the India’s booming $14 billion-a-year pharmaceutical market. The Indian market looks promising at present despite recent moves to impose price cuts and patent limits on some medicines. Although the pharmaceutical market in India is faced with a credibility crisis and regulatory hurdles, the market is witnessing consolidation (merger of the Indian entities of Pfizer and Wyeth in November 2013), thereby enticing global pharmaceutical firms with rapid stabilization, improved efficiencies, and better pricing policies to move in. Moreover, the Indian market is fast emerging as a global hub for drug manufacture with its massive operational infrastructure and availability of skilled manpower.

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