GSK to spend $1 billion to raise stake in GSK Pharmaceutical

GlaxoSmithKline (GSK) Plc plans to raise its stake in its Indian pharmaceutical unit to up to 75 per cent from 50.7 per cent through an open offer in a deal worth about 629 million pounds ($1.02 billion).

The offer is likely to begin in February and the deal is being managed by HSBC.

GSK on Monday said it would buy up to 20.6 million shares of GSK Pharmaceutical at Rs 3,100 a share, a premium of 26 per cent over its closing market price on Friday.

The company said that it planned to keep the Indian unit listed even after raising the stake.

According to Indian regulations, promoters of listed companies can hold up to a maximum 75 per cent stake. If the promoter's shareholding rises beyond 75 per cent, the company has to be de-listed from the bourse.

With the latest India deal, GSK is set to spend close to $2 billion in roughly a year to increase its holdings in two listed Indian companies, underscoring the British drugmaker's drive to deepen its footprint in emerging markets.

In February, GSK lifted its stake in its publicly-listed Indian consumer healthcare subsidiary, GlaxoSmithKline Consumer Healthcare, to 72.5 per cent from 43.2 per cent for $901 million.

The deals are the latest of several by GSK which is reducing its reliance on traditional prescription drug markets in Western economies where sales are slowing.

"For GSK, this transaction will increase exposure to a strategically important market and for our Indian pharmaceuticals subsidiary's shareholders. We believe it offers a good liquidity opportunity at an attractive premium," David Redfern, chief strategy officer of GSK, said in a statement.

The transaction will be funded by GSK's existing cash and will be earnings neutral for the first year and accretive thereafter, the company said in a statement.

GSK Pharmaceutical makes drugs for various areas including respiratory, cardiovascular, oncology, anti-infectives and dermatology.

($1 = 0.6143 British pounds)