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Thomas H. Lee Is Said to Be in Lead to Buy Glaxo Consumer Assets

Thomas H. Lee Partners LP is in the lead to buy consumer-health assets from GlaxoSmithKline Plc (GSK), and may announce a deal as soon as this week, said two people with knowledge of the matter.

THL is close to entering exclusive talks with Glaxo, said the people, who declined to be identified as the matter is private. The companies have yet to agree on price and may not reach a deal, the people said. Bain Capital LLC also submitted an offer for the assets, and Blackstone Group LP (BX) and Prestige Brands Holdings Inc. (PBH) put in a joint bid, they said.

Glaxo is selling products including the Alli diet pill, Lactacyd soap, FiberChoice diet supplements and Nytol sleep aid. Chief Executive Officer Andrew Witty plans to keep brands such as Sensodyne toothpaste and Panadol pain reliever as he expands Glaxo’s oral health, wellness and nutrition businesses in the consumer division.

“Glaxo is focusing on consumer assets it can globalize,” said Gbola Amusa, a London-based analyst at UBS AG. “These assets being sold are worth more to other companies with more of a regional focus.”

The brands for sale are mainly available in the U.S. and Europe and accounted for about 500 million pounds ($774 million), or 10 percent of Glaxo’s revenue from consumer products in 2010. A takeover of the Glaxo assets would mark the second major deal this year for THL, which bought food-marketing company Acosta Sales & Marketing in a transaction valued at more than $2 billion in March.

Revenue Gains

Excluding the brands targeted for disposal, third-quarter revenue at the consumer-health division increased 7 percent, Chief Financial Officer Simon Dingemans said on Oct. 26. Glaxo plans to return proceeds from a sale to shareholders through stock buybacks or “another vehicle” such as a special dividend, Witty said Feb. 3.

Spokesmen for Boston-based THL and London-based Glaxo declined to comment. Glaxo rose 1.7 percent to 1,453 pence in London trading.

Glaxo “has lacked sufficient critical mass in some product categories, and certain brands have lacked focus due to other global priorities,” the drugmaker said in a statement on April 14.

The Alli diet pill contains orlistat, a chemical that blocks the intestines from absorbing fat when taken as often as three times a day with meals. Orlistat has been linked to reports of liver injury, prompting consumer advocacy groups to demand its removal from the market. The U.S. Food and Drug Administration announced new warnings on the pill’s label in mid-2010.

More than 40 million people have taken orlistat, including 10 million who have used Alli, and the drug’s safety has been established in studies involving more than 30,000 patients, the company has said.

To contact the reporters on this story: Cristina Alesci in New York at calesci2@bloomberg.net; Makiko Kitamura in London at mkitamura1@bloomberg.net

To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net

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