The Largest Listing On The LSE In Over A Decade: Consumer Giant Haleon Is Demerging From GSK
Haleon’s Listning On LSE
Susannah Streeter, senior investment and markets analyst:
“This will be the largest London Stock Market listing in a decade, with the new company becoming a big beast with a new skin in the consumer goods world. Haleon, was chosen as a combination of the word hale, which means strong or healthy and leon from the Ancient Greek word for lion. It has strength in numbers, given its sprawling operations across 100 countries, and its string of multinational brands. It will have to be nimble though due to the cost inflation, which has whipped up across the consumer goods industry.
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Given its successful products, such as Sensodyne toothpaste and Advil and Voltaren pain killers, are household names, its big brand pulling power should help it hang onto customers, who may trade down other products in shopping baskets instead. The idea is that a more focused consumer business will help boost sales and that could push margins higher as once research and development production costs are covered. The aim is for a larger proportion of each additional item sold to drop through to profit and price hikes to feed through from last year, which should help.
The idea behind the demerger is for value to be unlocked in both businesses, but GSK is parcelling off a considerable quantity of its sizeable debt pile into Haleon, expected to be around £10 billion. The consumer business will start life with a net debt to cash profits (EBITDA) ratio of up to 4.0, compared to the 2.0 times planned for New GSK, which will focus on the pharmaceutical business. With the New GSK dividend expected to tick along at a lower level from 2023, and the consumer business likely to be cutting debt at least initially, it could take years for the overall dividend to return to its current level. As with any dividend, there are no guarantees.
There will be no change at the top of the consumer business which is a vote of confidence in Brian McNamara, a former Procter & Gamble executive who has led the division for eight years. Existing GSK investors are being handed shares in exchange for their portion held, so there will be no capital raising in this process, however once shares start trading in the secondary market, it’s still expected to be a gauge of the appetite for new listings on exchanges, given the volatility that has set in. New shares will be priced on Sunday dependent on the GSK share price at close of play on Friday. GSK plans to retain a near 14% stake in the business, which it intends to sell off over time. Pfizer owns the remaining 32%, but also intends to sell this stake. Neither GSK nor Pfizer will be able to start selling their holdings until November."
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Updated on Jul 15, 2022, 11:36 am
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