GlaxoSmithKline Plc (GSK), the U.K.’s largest drugmaker, is in talks to sell its Lucozade and Ribena drink brands to Japan’s Suntory Beverage and Food Ltd., according to three people familiar with the discussions.
An agreement could be announced as early as Sept. 9, and the business could fetch more than 1 billion pounds ($1.6 billion), said one of the people, who asked not to be identified because the negotiations are private. An agreement with Suntory would preempt an auction that was set to start this month. No final agreement has been reached.
Glaxo is splitting off the two drink brands as part of a revamp announced in April to separate older products from its bigger business of developing new medicines. Suntory has said it’s prepared to spend as much as 500 billion yen ($5 billion) on takeovers after its July initial public offering.
“The only thing that surprises me is that Suntory has previously said acquisitions would be targeted toward developing markets,” Damian McNeela, an analyst for Panmure Gordon, said by telephone. Still, Glaxo’s drinks are “solid brands” in the U.K., and Lucozade sales are rising abroad, he said.
Lucozade, an energy drink, and Ribena, a liquid concentrate marketed toward children, have combined annual sales of about 600 million pounds, McNeela said. Both are well-known brands in Glaxo’s home U.K. market.
“Nothing has been decided on this merger news as of now,” Kana Kamitani, a spokeswoman for Suntory Beverage, said in a telephone interview from Tokyo. “For our future growth, we are seeking every possibility.”
The talks between Glaxo and Suntory were reported earlier by Sky News.
Glaxo also said in April it was forming a new unit to house more than 50 older products with annual sales of about 3 billion pounds, prompting speculation it may sell the brands.