GlaxoSmithKline has splashed out $566 million to buy US consumer healthcare firm CNS in a cash deal that expands its over-the-counter operations.
Minnesota-based CNS manufactures Breathe Right nasal strips and FiberChoice dietary fibre supplements and GSK is paying $37.50 per share, which represents a premium of 31% over the US firm's stock price at close of business on October 6. The deal is expected to close by early 2007 and GSK said it will be neutral to earnings next year, and accretive from 2008.
CNS had sales of $118.5 million for its last financial year, which was up
18% over the previous 12-month period, and the vast majority of that (86%) came from revenues generated in the USA. Breathe Right is sold in 27 countries and FiberChoice is marketed solely in the USA, but John Clarke, president of GSK Consumer Healthcare, said "this outstanding business provides a great global growth opportunity."
He added that CNS' two major brands "fit with our growth strategy and are great additions to our portfolio. The opportunity for growth through geographic expansion and pipeline innovation make this acquisition an exciting prospect."
The news of the deal was greeted with no little euphoria by CNS and the firm's shares rose almost 30% once news of the deal broke. Reaction on the GSK side was more guarded, with some investors feeling that the premium being paid was a trifle excessive.
Nevertheless it was no surprise that GSK had moved to boost its consumer healthcare division, given that the firm recently lost out to Johnson & Johnson for Pfizer's OTC unit. Last year its bid to buy Boots'
over-the-counter medicines business failed as UK household and consumer goods firm Reckitt Benckiser stumped up £1.93 billion.