Pfizer faces setback as Reckitt Benckiser and GSK withdraw from $20bn consumer health deal

Pfizer’s $20 Billion Sale Stalls: In a significant turn of events in the pharmaceutical industry, both Reckitt Benckiser and GlaxoSmithKline (GSK) have decided to withdraw from acquisition talks with Pfizer regarding its consumer healthcare business. This decision marks a setback for Pfizer’s plans to offload this segment, valued at approximately $20 billion.

Overview of Pfizer’s Consumer Healthcare Division: Pfizer’s consumer healthcare business, which garnered revenues of $950 million in 2017, includes a broad range of over-the-counter (OTC) products such as Centrum multivitamins, Advil painkillers, and Caltrate calcium supplements. These products are distributed in over 90 countries, making up a significant part of Pfizer’s portfolio, which reported overall revenues of $13.7 billion in 2017.

Strategic Reconsiderations and Market Responses

Strategic Alternatives Considered by Pfizer: Last year, Pfizer announced it was exploring strategic alternatives for its consumer health division. The options considered included a complete or partial separation, or retaining the business, with a decision expected in 2018.

Withdrawal of Potential Buyers: Initially, consumer goods giant Reckitt Benckiser and later GSK, the British pharmaceutical company, were seen as frontrunners in acquiring this segment. However, both have now officially exited the talks. Reckitt Benckiser’s CEO, Rakesh Kapoor, cited that the deal did not align with their stringent acquisition criteria, particularly following their substantial acquisition of Mead Johnson Nutrition for $16.6 billion.

GSK’s Strategic Decision: Emma Walmsley, CEO of GSK, articulated her company’s decision to not pursue the Pfizer transaction, emphasizing that any opportunities considered must meet GSK’s criteria for returns and adhere to capital allocation priorities.

Industry Implications and Expert Analysis

Impact on Pfizer and the Industry: This series of withdrawals could compel Pfizer to reassess its strategy regarding its consumer healthcare business. The interest from major players like Sanofi, Nestle, and Johnson & Johnson early in the process, although non-committal, indicates a cautious approach in the competitive OTC healthcare market.

Expert Opinion on Strategic Movements: The pharmaceutical industry is witnessing a wave of consolidation and strategic realignments. Companies are increasingly scrutinizing potential acquisitions with a focus on long-term value creation and strategic fit. Pfizer’s challenge now lies in either finding a suitable buyer who meets its valuation or successfully integrating and maximizing the consumer health segment internally.

The exit of Reckitt Benckiser and GSK from the bidding process leaves Pfizer at a strategic crossroads with its consumer healthcare division. As the industry landscape continues to evolve, Pfizer’s next steps will be closely watched by competitors and investors alike, marking a critical point in its corporate strategy.