Moody's could lower GlaxoSmithKline

Moody's Investors Service said it placed the A1 long-term ratings of GlaxoSmithKline plc and its rated subsidiaries on review for downgrade.

Concurrently, the agency affirmed the provisional P-1/P-1 short-term ratings of GlaxoSmithKline and affected subsidiaries.

Moody's said the review initiation was prompted by GlaxoSmithKline's announcement that it will enter into a three-legged M&A transaction with Novartis Group consisting of the: (a) Disposal of the group's oncology business for $16 billion (including $1.5 billion of contingency payments); (b) acquisition of Novartis' vaccines business (excluding the flu vaccines franchise) for $5.25 billion (plus $1.8 billion of future milestone payments and ongoing royalties); and (c) creation of a consumer healthcare joint venture owned 63.5% by GlaxoSmithKline and fully consolidated.

As part of the proposed transaction, GlaxoSmithKline will also grant Novartis a put option on its 36.5% stake in the joint venture. The put option is exercisable from the end of year three post closing of the transaction in full or in part.

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