GlaxoSmithKline is facing rising pressure to sell its £10 billion consumer healthcare division, which includes big brands such as Ribena and Lucozade.

A fund manager for one of GSK’s largest shareholders, with a holding of more than 1 per cent, told The Times: “I would support a sale. Prices paid for these types of businesses at the moment are huge, so it is a good time to sell.” He had discussed the issue “many times” with GSK management.

Another investor said a sale would be “welcome” because shareholders had grown frustrated by an underperforming stock price.

As well as Ribena, GSK, Britain’s largest drugs company, makes over-the-counter medicines such as Panadol and Nicorette, and Aquafresh toothpaste. Sales for the 2006 financial year stood at £3.1 billion.

BACKGROUND

• GSK plan to beat fakes may be scrapped

• Why Ribena has got a new squeeze

• US Panel allows Glaxo to keep selling Avandia

• US rule on Avandia, with £1.2bn at stake for GSK

• GSK doubles buyback

No company is out of reach of activists

Shareholder activism is going to become one of the overriding themes of the second half of the year

Related Internet Links

• GlaxoSmithKline company information

• GlaxoSmithKline share price chart

• GlaxoSmithKline forecast

Peter Cartwright, analyst at Evolution Securities, said: “Glaxo’s share price has gone nowhere for five years and investors are getting fed up.” He estimated that a sale, allowing GSK to focus on its core prescription medicine and vaccine businesses, could fetch £9.3 billion to £12.4 billion.

GSK shares have slipped 10 per cent since May amid safety fears over its diabetes drug Avandia and are at their lowest levels since early 2005.

A third shareholder said GSK was “wide open” to receive a letter similar to that sent to Vodafone last week by a hedge fund calling for greater returns to investors. “Unlike Vodafone, Glaxo’s share price is on its backside and they’d have more difficulty defending themselves,” the shareholder said.

J.P. Garnier, the chief executive, said GSK intends to raise its dividend. It bought back £1.3 billion of shares in 2006 and is this year buying back

£2 billion as part of plan to buy back £6 billion over the next three years. Last year, it paid out £2.5 billion in dividends.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive