GSK’s derivation of its consumer health division, London’s largest shareholder in more than a decade, made a faint debut on Monday when the group now called Haleon launched itself into hectic markets overshadowed by concerns about inflation.
Shares of Haleon fell 6.6% to 308.4p on Monday after opening at 330p, giving the owner of brands such as Sensodyne toothpaste and Panadol painkillers a market valuation. of about £ 30 billion.
It was the largest listing in London since Glencore’s initial £ 37bn public offering in 2011 and makes Haleon the world’s largest autonomous consumer health business as well as one of the 20 largest companies. of the FTSE.
But analysts said GSK would face questions about its refusal to offer Unilever a £ 50bn offer (a figure that also represented £ 10bn of debt) for the division by the end of the year. past.
They also expressed concerns about the impact of inflation on business, as rising prices weigh on retail and consumer stocks. Martin Deboo, a Jefferies analyst, said Haleon had not yet shown that it could gain market share to drive growth rates above pre-pandemic levels.
The spin-off, led by former Novartis executive Brian McNamara and chaired by former Tesco CEO Dave Lewis, has projected annual sales growth of 4% to 6%, although most analysts expect growth at the lower end. of this rank.
Chris Beckett, head of securities research at wealth manager Quilter Cheviot, said the market price was “certainly at the lower end of where expectations were met,” but added: ” “This is an attractive industry and business to have exposure to, given its defensive attitude. Features at a time when volatility is disrupting markets.”
McNamara argued that the group’s products attracted strong brand loyalty.
“This is an amazing business, 100 per cent focused on consumer health, which is more relevant than ever after the pandemic,” he added. “We have less exposure to raw material costs [than other consumer groups] and environmental challenges. Our carbon footprint is smaller. “
The division aims to leave GSK, which has faced pressure from activist investors, free to focus on prescription drugs and vaccines. Shareholders received one Haleon share for every GSK share they owned.
Haleon, a joint venture with Pfizer that includes assets purchased from Novartis, is the only pure gambling consumer health group available to investors.
It competes with Strepsils maker Reckitt Benckiser, where consumer health accounted for a third of net revenue in 2021, and with Johnson & Johnson’s consumer health division, whose parent company plans to go out next year.
Shares of GSK remained stable on Monday, but fell 19.2 per cent from Friday’s close, reaching £ 13.89 on Monday, reflecting the decline in value after the split. The drug and vaccine group will consolidate its shares after Monday’s negotiation to return the price in line with its pre-split level.
The split has been a test for Emma Walmsley, GSK’s chief executive since 2017, who said it would address “perennially low performance” by leaving the pharmaceutical company with a stronger balance sheet while allowing Haleon to invest in marketing and new products. .
Beckett said the gap between Haleon’s market value and Unilever’s offering would provoke more questions from investors: “Will Haleon’s management justify why they rejected the approach.”
GSK and Pfizer hold together a $ 15 billion stake in Haleon, which they intend to sell after a lockout ends in November.
Deboo said Haleon executives had been concerned about integrating the consumer health divisions of Pfizer and Novartis. “Now that this integration is complete, redirecting this energy could pay off,” he said.
Haleon plans to reduce its debt over time, but McNamara said the group had the capacity for a consolidated acquisition a year over the next two years and would look for fast-growing groups worth £ 50 million to £ 100 million. million pounds.
The company has said it hopes to benefit from long-term trends, such as an aging world population and pressure on public health systems that drive consumers to treat health problems themselves.