Pharmaceuticals giant Novartis has sold its Dundee manufacturing plant to US-based Prozac maker Lilly as part of a £3.2 billion deal.
The new owners of the Dunsinane Industrial Estate animal vaccines facility did not offer guarantees over the safety of around 100 jobs at the plant as they revealed plans to make hundreds of millions of dollars of efficiency savings.
Lilly, which has its UK headquarters in Basingstoke, said the Novartis operation would be integrated into its Elanco concern, and the new enlarged business would be the world’s second-largest animal health group.
In addition to the Dundee facility, Lilly is acquiring a further eight manufacturing plants and six research and development units which collectively employ 3,000 staff.
The company yesterday said it expected to deliver annualized cost savings of $200m per year within three years of the deal for Novartis’ animal health operation closing.
“Our Animal Health associates will have the opportunity to benefit from joining a large, global business,” a spokesman said.
“As is the case with transactions of this size, it is too early to comment on what the combined organisation will look like or whether there will be headcount reductions.
“These details will be worked out over the next few months.
“We are committed to keeping associates informed on a regular basis on the progress made.”
Chairman and CEO John C Lechleiter said the sector offered attractive growth opportunities for Lilly.
“Global trends suggest continued sustained demand for animal health products in the years ahead,” Mr Lechleiter said.
“Through this acquisition, which moves Elanco to top-tier in the industry, we intend to create value for our shareholders by adding to our promising pipeline of innovative animal health assets, increasing sales through a larger commercial footprint, and improving efficiencies and lowering costs.”
The move to offload the Dundee plant was part of a complex series of transactions revealed by the Swiss-based group yesterday, which also involved UK giant GlaxoSmithKline.
Staff at GSK’s two Scottish facilities in Montrose and Irvine were yesterday called together to be briefed on the multi-billion-pound tie-up between the two firms.
The agreement includes three separate but linked transactions between Novartis and GSK including the creation of a new “world-leading” joint venture company focused on the consumer healthcare market.
GSK confirmed it was selling its cancer products business a unit which contributes around 4% of its global sales for a potential £9.5bn total receipt, while moving to pick up Novartis’ global vaccines division for a little over £4bn.
The GSK/Novartis deals which sparked a rise in both company’s share price in morning trading are scheduled to complete in the first half of next year, while the Novartis/Lilly transaction is expected to conclude slightly earlier next year.
A spokeswoman for GSK yesterday said it was expected the overall UK impact of the new agreements would be minimal but site-by-site specifics were not available.
However, she said GSK was commited to growing its vaccines and consumers business and said it was possible that further investment in UK sites could follow as 20% of the proceeds arising from the Novartis transactions would be ploughed back into the firm’s research and development and innovations programmes.
Announcing a proposed £4bn cash return for shareholders, chief executive officer Sir Andrew Witty said the new agreements would strengthen GSK’s global business and being earnings accretive from year one.
“Opportunities to build greater scale and combine high quality assets in vaccine and consumer healthcare are scarce,” Sir Andrew said.
“With this transaction we will substantially strengthen two of our core businesses and create significant new options to increase value for shareholders.”
GSK shares closed up 5.2%.
Novartis hailed the three-pronged deal.
“The transaction marks a transformational moment for Novartis,” Novartis CEO Joseph Jimenez said.
“They focus the company on leading businesses with innovation power and global scale.
“They also improve our financial strength and are expected to add to our growth rates and margins immediately.
“We have also created a world-leading consumer healthcare business in our joint venture with GSK.
“We believe the divestment of our smaller vaccines and animal health division will enable us to realise immediate value from these businesses for our shareholders, and these divisions will benefit from being part of large, global businesses that are also leaders in their segments.
“Patients will benefit from even higher levels of innovation that this focus may afford.
“Looking ahead, this positions Novartis well for future healthcare industry dynamics.”
Shares in Novartis closed up 2.28%.