GSK's consumer health spinoff Haleon preps launch with $12B+ in debt
GSK’s consumer health spinoff Haleon will make its big debut in just over a week — but with some serious debt in tow, according to the company.
When it lists on the London Stock Exchange on July 18, Haleon will have about £10.3 billion (more than $12 billion) in debt on the balance sheet, GSK confirmed on Wednesday. That’s around four times the spinoff’s estimated earnings for the year, according to the UK’s This is Money, which first reported the news.
Barclays analysts have previously called Haleon the “largest listing in Europe for over a decade.” Though the spinoff will be challenged with “significant debt,” the analysts predict sales will top £13 billion (more than $15 billion) by 2026.
Earlier this year, GSK called the demerger the “most significant corporate change for GSK in the last 20 years,” adding that Haleon will lead in major categories such as pain and respiratory health with power brands like Advil and Theraflu.
“It will come to the market with significant debt, c.£10.3bn or 4x EBITDA, but we expect organic deleverage to fall below 3x by the end of next year,” Barclays analysts wrote in a recent report.
Haleon also owns popular brands such as Sensodyne toothpaste and Robitussin cough syrup. The portfolio includes consumer health drugs from both Novartis and Pfizer as a result of deals from 2017 and 2019, respectively. Sales last year totaled £9.54 billion, or around $11.3 billion. This year, Barclays analysts expect sales to reach £10.67 billion, or more than $12.7 billion.
The company is expected to be valued between £38 billion and £45 billion, This is Money reported.
Barclays analysts noted:
Haleon’s valuation will, in our view, likely be a function of market expectations of its structural Organic Sales Growth. From our conversations with investors, there is a degree of scepticism around its 4-6% target, and significant pushback on our 4.7% medium-term growth forecast. We look for 6% OSG this year (albeit partly helped by Covid headwind unwind), but the key question for valuation longer term is likely where growth stabilises next year.
Last month, Pfizer announced that it plans on exiting its 32% stake in Haleon “in a disciplined manner” after the company lists — a complete turnaround from GSK’s previous announcements that said Pfizer would retain its 32% stake and appoint two board members. According to a quarterly filing, Pfizer could get roughly $15.8 billion from its stake.
Earlier this year, GSK punted multiple unsolicited offers from Unilever to buy the consumer health spinout for £50 billion ($68 billion).
The GSK board decided that Unilever’s offers “fundamentally undervalued the Consumer Healthcare business and its future prospects.” And CEO Emma Walmsley has long held that as opposed to a sale, a spinout allows GSK shareholders to get the best of both worlds — shares in both the new GSK, which is homing in on pharma and vaccines and Haleon.
The company’s name is a mashup of the words “hale,” meaning “in good health,” and “leon,” which is associated with strength.
