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GSK shops Lucozade, Ribena brands

by Thomas Zadvydas | Published April 25, 2013 at 9:45 AM

GlaxoSmithKline plc said Wednesday that it will sell soft drink brands Lucozade and Ribena in a move some observers suggest could raise more than £1 billion ($1.5 billion).

The British biotechnology and pharmaceutical company announced the move along with first-quarter results Wednesday. It also comes a day after GSK announced it entered into a collaboration agreement with Avalon Ventures worth up to $495 million to fund and launch up to 10 life sciences companies in San Diego over the next three years.

GSK said it will divest the assets to focus its consumer health business on global health products.

"We concluded that the tremendous growth potential of these iconic brands, particularly outside the core Western markets, could be better leveraged by companies with existing category presence and infrastructure in these regions," GSK chief executive Andrew Witty said in a statement Wednesday.

GSK was reviewing the brands from at least early February.

GSK does not break down sales figures for Lucozade and Ribena individually, but the brands bring in nearly £600 million a year, with much of that generated in the U.K. GSK explained the brand has potential to grow outside Great Britain but that this could better be accomplished by someone with stronger distribution networks in emerging markets for soft drinks.

Japanese whiskey and health products maker Suntory Holdings Ltd. of Osaka is said to have made a bid for the brands around April 16, according to one source not involved in the auction. Suntory bought French beverage maker Orangina Schweppes Group from Blackstone Group LP and Lion Capital LLP for a reported ¥300 billion ($3 billion) in 2009.

A GSK spokeswoman declined comment. Suntory officials couldn't be reached for comment.

Private equity shops might also bid for the brands. Possible bidders include Lion Capital, BC Partners Ltd. and CVC Capital Partners, said an analyst who asked not to be named. The analyst said a $1.5 billion price tag for the brands is likely.

Lucozade and Ribena are marketed as energy and soft drinks and date back to 1927 and 1938, respectively. Lucozade, once known as Glucozade, was invented by Thomas Beecham in 1927, who was experimenting with methods to provide the sick with an easy energy source. Ribena, made from a dark, cherry-like fruit called blackcurrant, was invented 11 years later by Vernon Charley, who was researching use of pure fruit juices for milkshakes.

"Lucozade in particular has a footprint dominated by Britain and Northern Ireland. That business in the quarter was down 2%. It has a very significant business in Nigeria and one or two other, smaller, emerging markets, which were up 16%," Witty said on a conference call Wednesday.

He added: "We think there is a reasonable probability that there are other potential owners who will be able to generate greater value, because they may have better synergies and better distribution footprints in this particular part of the business and, as a consequence, would be able to create more value than we can."

GSK, of Brentford, U.K., reported £1 billion in net income on £6.4 billion in sales for the first quarter of 2013, compared with £1.3 billion in net income on £6.6 billion in sales for the same period last year.

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GSK shops Lucozade, Ribena brands

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