Shares in GSK spinout Haleon slide after £30bn initial sale

GSK spin-off Haleon slipped on its trading debut in London as market turmoil and inflation concerns weighed on Britain’s newest consumer goods giant.

The maker of Panadol painkillers and Sensodyne toothpaste opened for 330p on Monday, valuing the business at around £30bn (€35bn). The stock traded as low as 337.40p earlier in the day before giving up gains to close 6.6 per cent lower.

The listing comes as the war in Ukraine, rising interest rates and a deepening cost-of-living crisis fueled by roaring inflation weigh on risk appetite.

Consumer and retail stocks in the UK have been particularly hard hit this year.

The split is part of a restructuring aimed at boosting the prospects of both companies following pressure from activist investor Elliott Investment Management.

Before the spin-off, Unilever had made a £50bn bid for the company which fell through in January. Nestle is also said to have looked into purchasing the unit.

While Haleon should be valued at around £33 billion according to analysts at Credit Suisse, some investors will likely focus on takeover interest in recent months.

“Investors may be wondering why GSK didn’t accept Unilever’s much higher offer,” said Danni Hewson, financial analyst at AJ Bell.

“Although Haleon owns some well-known brands like Sensodyne and Advil, that may not be enough to attract a number of buyers to the stock.”

The company immediately ranks among the UK’s largest listed companies. GSK, which has transferred some of its sizable debt to the entity, will focus on prescription drugs and vaccines.

However, Haleon “needs to be nimble because of cost inflation,” said Susannah Streeter, a senior analyst at Hargreaves Lansdown. “Her attraction to big brands should help her hold on to customers who might be swapping other products in shopping baskets instead,” she said.

The company must show that it can achieve its goal of annual sales growth of 4 to 6 percent over the medium term while reducing debt.

Haleon also highlighted two new deals earlier this year to switch drugs from prescription to an over-the-counter format, and said it plans to roll out the so-called switches in 2025 and 2026, without giving further details.

With the global economic outlook deteriorating, companies are looking for cheap ways to increase investor returns and focus on their core businesses. The demerger of entities can unlock value for shareholders and increase parent company stock.

Other healthcare giants are following in GSK’s footsteps, and Johnson & Johnson announced in November that it intends to divest its consumer division as well.

Sanofi scrapped plans to list its drug ingredients business and instead spun it off in May to dodge the market turmoil.

Investors are also pressuring companies from HSBC Holdings to Glencore and Glanbia to split up and return value to shareholders.

In a demerger, no shares will be offered to the market as the entity’s shares will be surrendered to existing shareholders upon listing. Shares in GSK spinout Haleon slide after £30bn initial sale

Fry Electronics Team

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