, LONDON, Feb 2, 2011 – British drugs firm GlaxoSmithKline announced Wednesday the sale of its stake in US company Quest Diagnostics for $1.7 billion (1.3 billion euros).
The disposal, announced on the eve of GSK\’s annual results, comes after the group revealed last month that it will take a huge legal charge of £2.2 billion linked to its former blockbuster diabetes product Avandia.
"GlaxoSmithKline plc announces that it has sold its entire holding of 30,755,151 shares of common stock in Quest Diagnostics Inc," GSK said in a statement.
The divestment comprises a secondary public offering and a repurchase of stock by Quest, GSK added.
"The offering and repurchase are together expected to generate gross proceeds to GSK of approximately $1.7 billion. Net of tax, GSK expects to receive cash proceeds of approximately $1.1 billion," it said.
Meanwhile, the enormous Avandia legal charge is expected to skew the GlaxoSmithKline\’s annual results that are due for publication on Thursday.
GSK was hit last September when the EU said it would ban Avandia over fears it increases the risk of heart attack and strokes. Regulators have also restricted its availability in the United States.
"The (Quest) news comes in advance of tomorrow\’s full-year results announcement which will be coloured, to a large extent, by the impact of the £2.2bn legal charge," said Seymour Pierce healthcare analyst Mike Mitchell.
He also predicted that the Avandia charge "will all but wipe out reported operating profits for the fourth quarter".
London-listed GSK acquired the Quest shareholding in 1999, after the sale of its clinical laboratories business, and has gradually cut its stake since then.
"Whilst we have been pleased with our investment in Quest Diagnostics, we have been considering the sale of our remaining position in the company for some time," added GSK chief financial officer Julian Heslop.
"We have decided that now is a good time to take advantage of favourable market conditions, thereby releasing funds from one of our non-core assets.
"This divestment demonstrates our focus on generating attractive returns for our shareholders and our ability to monetize significant gains when appropriate."