GSK spin-off Haleon becomes world’s biggest standalone consumer health group

GSK’s consumer health spin-off Haleon has become the largest London listing in more than a decade on its first day of trading, making the owner of Sensodyne toothpaste and Panadol painkillers the world’s biggest standalone consumer health business.

Haleon shares opened at 330p, giving the group a market valuation of £30.5bn, the biggest London listing since Glencore’s £37bn IPO in 2011.

This propelled it straight into the FTSE’s largest 20 companies, but even accounting for its £10bn of debt, came in well below the £50bn offered last year by Unilever to buy the company.

Chris Beckett, head of equity research at wealth manager Quilter Cheviot, said the market pricing was “certainly at the lower end of where expectations were coalescing”, but added: “This is an attractive industry and business to have exposure to, given its defensive characteristics at a time where volatility is upsetting markets.”

As well as launching into choppy markets, Haleon will have to contend with the impact of inflation on consumers, though chief executive Brian McNamara said its products attracted strong brand loyalty.

“This is an amazing business, 100 per cent focused on consumer health, which is more relevant than ever coming out of the pandemic . . . we have less exposure to commodity-related costs [than other consumer groups] and to environmental challenges, our carbon footprint is lower,” he added.

The split 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 each GSK share they own.

Haleon, a joint venture with Pfizer, is the only listed pure-play consumer health group available to investors, though 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, which it plans to spin out next year.

GSK shares were down 19.5 per cent at £13.83 on Monday, reflecting the reduction in value following the spin-off. The drugs and vaccines group will consolidate its shares to bring the price back in line with its pre-demerger level.

The split has been a test for GSK’s Emma Walmsley, chief executive since 2017, who said it would tackle “perennial underperformance” by leaving the drug company with a stronger balance sheet while setting Haleon free to invest in marketing and new products.

Beckett said the gap between Haleon’s market value and Unilever’s offer would prompt further questions from investors: “It will be for Haleon’s management to justify why they rejected the approach.”

GSK and Pfizer together retain about $15bn of holdings in Haleon, which they intend to sell after a lock-up ends in November.

The spin-off, headed by former Novartis executive McNamara and chaired by former Tesco chief executive Dave Lewis, has forecast annual like-for-like sales growth of 4 to 6 per cent, though most analysts expect growth at the lower end of that range.

It aims to reduce its debt over time, but McNamara said the group had capacity for a bolt-on acquisition a year for the next two years and would look at fast-growing groups worth £50mn to £100mn.

Haleon has said it expects to benefit from long-term trends such as an ageing global population and pressure on public healthcare systems driving consumers to seek to address health problems themselves.