GSK Sells half their Aspen stake

First the price moves and then the news comes. I am talking about Aspen Pharma. The share price has dropped (admittedly along with the rest of the market) after what could only be described as very good results, this time there are reports suggesting that GSK are looking to sell half their stake in Aspen for a discount. The suggestion is a 5.3 to 10.2 discount to the closing price last evening, according to sources. They (GSK) would look to reap 890 million Dollars from the sale, and would agree not to sell the rest for the next six months. They have exited a third before. Why would they want to do this? In-between writing these two sentences above and now, the SENS announcement came from the company:

"GlaxoSmithKline ("GSK") has announced the completion of the disposal of half of its 12.4% shareholding in Aspen (equivalent to 28.2 million ordinary shares). These shares were sold by means of an accelerated book build offering process which resulted in the shares being sold at ZAR 372 per share, raising gross proceeds of approximately ZAR 10.5 billion."

Still, that does not answer the question of why? If you read an FT article from last evening: GSK to sell Aspen stake for almost $900m, the suggestion is simple, GSK need the money in order to safeguard the dividend against the backdrop of stagnant growth in their own business. Don't fret, GSK still have 6.2 percent and the shares were snapped up in a flash. GSK may sell the rest of their stake off, who knows, the fact that Aspen were able to do some early stage deals with GSK from their noncore stable, the fact that the two have a good understanding, the fact that there would be a whole lot of fresh new shareholders is not necessarily a bad thing. In these cases I am always much more interested in who bought the shares, they got the discount and must be feeling happier.

Although, as the market opens this morning the stock is down sharply, down 6 percent at the get go, improving as we speak, down 4 and three quarters of a percent. The same thing happened last time, when the stock sold off heavily after the exit of part of the stake by Glaxo. Currently around 388 Rand a share. We continue to recommend the business as a buy, long term it is quality outfit, spectacular management, growing markets and always looking for quality transactions.

How did GSK acquire these shares in the first place? At their height, GSK owned 18.6 percent, that is down to 6.2 percent? The original and first transaction from May 2009 was the issuance of 68.5 million Aspen shares (16 percent at the time) to Glaxo for 3.47 billion Rand (my math says 50.65 Rand a share) or 272.6 million Pounds. Or ... 3.98 Pounds a share. Selling 28.2 million shares at 372 Rand, or (at the exchange rate yesterday) of 18.33, that equals 20.29 Pounds per share. So in less than six year, they (GSK) have made a five fold gain, in Pounds!! Over the last five years, the GSK share price has been completely static, up a mere 24 percent as when compared to Aspen, in Pound terms.