GSK Nigeria Optimistic Parent Will Agree to Take Stake
GlaxoSmithKline Plc (GSK), the U.K.’s biggest drugmaker, will probably agree to take a majority stake in its Nigeria business after suspending the plan four months ago, according to the head of the Lagos-based company.
“Our focus is that if it has to be done and when it is done, it’s done right,” Chidi Okoro, chief executive officer of GlaxoSmithKline Consumer Nigeria Plc (GLAXOSMI), said in a Nov. 24 interview in Lagos, the commercial capital. “The plan is only suspended. It certainly will come up at some stage.”
GlaxoSmithKline in July postponed a $97 million move to raise its stake in the Nigerian business to 80 percent from 46.4 percent in order to further consult with shareholders and the country’s regulator. The parties couldn’t agree on a price for the shares after the market value increased during negotiations, Okoro said on July 23. Glaxo said in November 2012 it would pay 48 naira a share for the stake, compared with its value of 64.80 naira in Lagos yesterday, having gained 44 percent in 2013.
GlaxoSmithKline London-based spokesman Simon Steel declined to comment further than a statement on July 22, which said Glaxo’s proposal to increase its stake in the Nigerian business will be withdrawn. It said in November it would buy about 321 million shares for 15.4 billion naira ($97 million). A deal at 64.80 naira per share would cost 20.8 billion naira.
Nigerian shareholders considered the price offered by Glaxo unfair and asked for a deal at the prevailing market value, Standard Shareholders Association of Nigeria, which represents minority shareholders, said at the time. Although the London-based company has yet to reach an agreement, “Glaxo has strong interest in investing in Nigeria,” Okoro said.
Glaxo wants to increase its exposure to Nigeria to take advantage of rising consumer spending in Africa’s most populous nation, where 2013 economic growth is expected to be 6.5 percent, according to the median estimate of 12 economists surveyed by Bloomberg.
GlaxoSmithKline Consumer Nigeria plans to complete a deal with Tokyo-based Suntory Beverage & Food Ltd. (2587) to continue to manufacture and produce Lucozade and Ribena brands in the country, although an accord could lead to a 3 percent to 4 percent decline in operating margin over 2014 and 2015, according to Okoro. The brands accounted for more than half of GSK Nigeria’s sales and operating profit in 2012, he said.
Glaxo said Sept. 9 it sold Lucozade and Ribena to Suntory for 1.35 billion pounds ($2.19 billion) as the Japanese company seeks to expand outside its domestic market.
“We need to get into the relationship to know how it impacts on our products and income,” Okoro said. “Our priority is to make sure that consumers continue to get the two brands.”
Glaxo Nigeria may introduce new products next year to boost volume in sub-Saharan Africa’s second biggest economy amid plans to increase sales of other brands including Sensodyne toothpaste, Horlicks drinks, and Panadol painkillers, Okoro said.
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