GSK to acquire Stiefel for $3.6 billion

GlaxoSmithKline, or GSK, and Stiefel Laboratories have signed an agreement to create a new specialist dermatology business. Under the terms of the agreement GSK will acquire the total share capital of Stiefel for a cash consideration of $2.9 billion. GSK also expects to assume $0.4 billion of net debt upon closing. A potential further $0.3 billion cash payment is contingent on future performance.

GSK’s existing prescription dermatological products will be combined with Stiefel’s and the new specialist global business will operate under the Stiefel identity within the GSK Group.

GSK said that the new business will have a broad portfolio of dermatology products including Stiefel’s leading brands: Duac, for acne, Olux E for dermatitis and Soriatane for the treatment of severe psoriasis. GSK’s key dermatology brands include: Bactroban, Cutivate and recently launched Altabax.

Charles Stiefel will continue in the role of CEO and chairman of the board of Stiefel until closure of the transaction and he will lead the new business thereafter.

The formation of the new business is expected to provide significant opportunities for both sales and cost synergies. Stiefel’s products will benefit from GSK’s global distribution and commercial organizations, particularly in markets such as Brazil, Russia, India, China and Japan. GSK’s products will benefit from Stiefel’s specialty sales force, relationships and experienced management in dermatology.

The transaction has been approved by Stiefel’s stockholders. Closing of the transaction is conditional upon certain matters including receiving certain regulatory clearances and no material adverse change occurring in respect of Stiefel’s business prior to closing. The transaction is expected to close in the third quarter of 2009.

Andrew Witty, CEO of GSK, said: As part of our strategy to grow and diversify GSK’s business, we are continuing to make new investments through targeted acquisitions. This transaction will create a new specialist dermatology business and re-energize our existing dermatology products.

The addition of Stiefel’s broad portfolio will provide immediate new revenue flows to GSK with significant opportunities to enhance growth through leveraging our existing global commercial infrastructure and manufacturing capability. We look forward to working with Stiefel to develop this exciting opportunity.