INSIGHTS AND PERSPECTIVES

Editor’s note: Merging of the minds

The GSK-Pfizer deal will level the playing field between retailers and this soon-to-be powerful supplier

BY Seth Mendelson

Got a headache? There’s a good chance you may turn to Advil or Excedrin for relief. Looking for a good toothpaste? Sensodyne may be the answer. Tummy problems? Tums always is at the forefront of consumers’ minds. How about a multivitamin? Centrum is a market leader.

These are some of the many well-known and respected brands owned by either GlaxoSmithKline’s or Pfizer’s consumer healthcare divisions — and a reason for the surprising, but not totally unexpected, mid-December announcement of the merger of the two. The all-equity deal probably should close later this year, with GSK controlling a 68% share of the new company.

Just like major retailers across the nation — and many may say around the world — manufacturers are aware that they have to combine resources in order to survive the quickly changing retail landscape. This merger, which creates a company with nearly $13 billion in annual sales, will help level the playing field with retailers that are taking their own steps to ensure survival in the coming years.

With all the talk of private label and store brands, trusted national brands produced by companies like GSK and Pfizer still remain the backbone of any mass retailer’s operation. Merging two giant operations will create synergies that will save money and muscle that can be used in negotiations with retailers for better deals, more shelf space and greater visibility within their stores.

But make no mistake about it, this merger is a Wall Street powerplay at heart. The combined company initially will save a boatload of money for both GSK, based in the United Kingdom, and New York-based Pfizer. The plan, company officials said, eventually is to, perhaps in as little as three years, take the new company public and allow both giant companies to take their newfound savings and concentrate on what they do best and what offers the best margins: the pharmaceutical industry.

And take this to the bank as well: This will not be the last merger of businesses among the big players in the consumer healthcare and pharmaceutical industries. Rather, this will serve as a sign that getting bigger is vital to any company that wants to thrive in mass retail in the years ahead. Expect more deals in the coming months and years as other companies try to position themselves as key players in the industry.

Yes, my friends, the retail battlefield is heating up. Hang on to your seats and get into position to maximize these changes.

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