EU approves deal between GlaxoSmithKline and Novartis

The European Union (EU) has approved a three-part deal between drug giants GlaxoSmithKline (GSK) and Novartis, worth more than $20 billion (13.23 billion pounds) in total.

Under the terms of the agreement, Novartis' scope will become more focused and GSK will be transformed into a vaccines and consumer drug powerhouse.

The European Commission (EC), the EU's top antitrust authority, approved the deals with the proviso that both firms divest a number of assets and sign distribution agreements aimed at alleviating concerns regarding competition.

In April 2014, Novartis agreed to acquire GSK's high-margin oncology unit for around $16 billion, while the former consented to sell its lower-margin vaccines division to the latter for $5.5 billion.

Furthermore, the firms are launching a joint venture, with GSK having the majority share in, for its consumer business, which covers drugs that can be purchased over the counter, creating a powerhouse in the industry.

The combined firms will enjoy revenues of around $11 billion and will own household brands including Excedrin and Panadol.

In a statement, the EC, said it had concerns that the transactions would "have eliminated an important competitor to GSK for the supply of several vaccines and consumer health products, which might lead to price increases for European consumers".

To dispel these worries, GSK and Novartis both agreed to shed some assets.