GlaxoSmithKline (GSK) and Pfizer have agreed to combine their consumer health businesses into a new world-leading joint venture with combined sales of around £9.8 billion ($12.7 billion).

Under the agreement, GSK will take a controlling interest of 68% with Pfizer holding 32% of the jv, which will operate worldwide under the GSK Consumer Healthcare name.

Earlier this year, GSK pulled out of bidding for Pfizer’s consumer healthcare arm, instead turning its sights on buying out partner Novartis’ 35.6% stake in their consumer joint venture. GSK said the jv with Pfizer represents a “compelling opportunity” to build on the Novartis buyout and deliver further significant shareholder value. The UK drugs giant added that the deal also supports its key priority of strengthening its pharmaceuticals business.

Within three years of the transaction closing, GSK intends to separate the jv via a demerger of its equity interest and a listing of GSK Consumer Healthcare on the UK equity market.

“With our future intention to separate, the transaction also presents a clear pathway forward for GSK to create a new global pharmaceuticals/vaccines company, with an R&D approach focused on science related to the immune system, use of genetics and advanced technologies, and a new world-leading consumer healthcare company, said GSK’s CEO, Emma Walmsley.

Albert Bourla, chief operating officer and incoming CEO of Pfizer, commented: “The combination of these leading businesses with distinct regional and category strengths will be more sustainable and broader in scope than either company individually.”

Both companies said the jv will combine two highly complementary portfolios that include GSK’s Sensodyne, Voltaren and Panadol and Pfizer’s Advil, Centrum and Caltrate. The merged company will be a category leader in pain relief, respiratory, vitamin and mineral supplements, digestive health, skin health and therapeutic oral health.  It will also be the global leader in over-the-counter products with a market share of 7.3%, ahead of its nearest competitor with 4.1%, and hold the number one or two market share positions in all key geographies, including the US and China.

Pfizer expects the transaction to deliver $650 million in peak cost synergies and to be slightly accretive for Pfizer in each of the first three years after closing, which is anticipated during the second half of 2019.

GSK anticipates that the jv will generate total annual cost savings of £500 million by 2022 and expects planned divestments targeting about £1 billion of net proceeds to cover the cash costs of the integration.

The proposed transaction remains subject to approval by GSK shareholders and the receipt of antitrust approvals.