GSK Confirms Consumer Healthcare Unit Spin-off: What Investors Should Know

Close on the heels of an M&A deal, GlaxoSmithKline plc GSK confirmed the spin-off of the consumer healthcare business it jointly owns with U.S. pharma giant Pfizer, Inc. PFE.

What Happened: GSK said it is spinning off its consumer healthcare business into an independently-traded public company, named Haleon, a regulatory filing on Wednesday showed.

The proposed separation will be implemented by way of a demerger of at least 80% of GSK's 68% stake (about 54.4% of the total) in the joint venture in favor of its shareholders.

The shareholders will receive one share of Haleon for every GSK share they hold. GSK and Pfizer will hold about 6% and 32%, respectively, in Haleon.

GSK and Pfizer will receive a one-time dividend ahead of the demerger, with the former receiving 7 billion pounds ($8.82 billion).

Pfizer indicated that it intends to exit its 32% ownership interest in Haleon in a disciplined manner, with the objective of maximizing value for its shareholders.

GSK said it has submitted to the U.K. regulator – The Financial Conduct Authority - a circular related to the proposed transaction and the prospectus regarding the listing of Haleon ordinary shares.

Haleon shares are expected to begin trading on the main market of the London Stock Exchange on July 18. Haleon's listing will be the biggest in the U.K. in a decade, FT reports.

GSK also expects to apply for the listing of Haleon ADSs on the NYSE shortly.

Earlier this year, GSK spurned an offer from Unilever plc UL to buy the consumer healthcare business for 50 billion pounds (then valued at $68.4 billion).

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Why It's Important: Following the spin-off, GSK would focus solely on biopharmaceuticals, investing in vaccines and specialty medicines. This focused approach, according to the company, will help deliver compounded annual growth of more than 5% and 10%, respectively, in sales and adjusted operating profit.

Haleon, meanwhile, will evolve as a leader in consumer healthcare, offering its shareholders a portfolio of brands, including Sensodyne, Eno, Panadol and Aquafresh, with an "attractive footprint and competitive capabilities."

The company is expected to deliver medium-term annual organic growth of 4-6% and sustainable moderate adjusted margin expansion.

The closing of the transaction is contingent on its approval by GSK shareholders, final approval by the board and all necessary governmental/regulatory approvals, among other things. GSK shareholders will meet for the general meeting in London on July 6.

Price Check: Shares of GSK were up by 0.14% at $43.96 during Wednesday's premarket session, according to Benzinga Pro.

Photo: Courtesy of GSK on Flickr