Swiss pharmaceutical firm Novartis is selling its stake in a consumer health care joint venture with GlaxoSmithKline to the British company for $13 billion (10.4 billion euros).
The joint venture was formed in 2015 and Novartis holds a 36.5-percent stake. Novartis CEO Vas Narasimhan said in a statement Tuesday that it "is progressing well," but "the time is right for Novartis to divest a non-core asset at an attractive price."
Novartis said the sale will be a cash transaction, and is subject to the approval of GSK shareholders. The four Novartis-appointed directors on the joint venture's 11-member board will step down when the sale is completed.
"This will strengthen our ability to allocate capital to grow our core businesses, drive shareholder returns, and execute value creating bolt-on acquisitions as we continue to build the leading medicines company, powered by digital and data," the statement said.
It said the completion of the deal is expected in the second quarter of 2018, "subject to necessary approvals".
GSK said the original joint venture agreement gave Novartis the right to require GSK to buy all or part of its stake at any point between March 2 this year and 2035. It said that put option created "inherent uncertainty" for its financial planning.
"The new agreement to buy out Novartis' stake removes this uncertainty and improves the group's ability to plan allocation of capital to its other priorities," GSK said.
It added that it is initiating a strategic review of Horlicks and other consumer health care nutrition products, the majority of whose sales are in India, "to support funding of the transaction" among other things. The review will include an assessment of GSK's 72.5 percent holding in GlaxoSmithKline Consumer Healthcare Ltd., which sells the products in India.
The healthcare joint venture includes Sensodyne toothpaste, Theraflu cold medicine and Nicorette tobacco replacement products.
Novartis stocks rose nearly 2 percent, while GSK stocks jumped more than 3 percent after the announcement.
The GSK consumer health care business had sales of 7.8 billion pounds ($11.1 billion) last year.
The two groups set up the consumer healthcare joint venture in 2015 following after a major reorganization of the Swiss group's drugs portfolio.
The split marks the first major transaction since Narasimhan succeeded Joe Jimenez as chief executive last month.
Novartis in January reported that strong sales of two of its main blockbuster drugs enabled it to turn in a "good operational performance" in 2017.
Net profit climbed by 15 percent to $7.7 billion in 2017 on a one-percent increase in sales to $49.1 billion.
GlaxoSmithKline's net profits jumped 70 percent to £1.5 billion ($2.1 billion, 1.7 billion euros) last year on bumper sales.
Novartis is not the only pharmaceutical company that is trying to shed its over-the-counter drug business. U.S.-based Pfizer and German rival Merck have similar plans.
GSK had shown interest in Pfizer's consumer product subsidiary, which is estimated to be worth at least 20 million dollars, but the British firm dropped its bid last week.