Haleon sold ChapStick for more than $500m as it sought to reduce its debts while also boosting its stock price.
The FTSE-100 company has agreed that it will sell its lip balms to Suave Brands for approximately $430 million cash plus a minority stake in Suave Brands valued at around $80 million. This is below the $600 million previously proposed price.
Haleon, one of Britain’s largest pharmaceutical groups, was spun off in July 2022. It was the biggest London listing for more than 10 years. Haleon was saddled with debt after the separation. This is primarily due to the issuance of bonds for GSK to pay dividends of about £10 billion to Pfizer and GSK’s joint-venture partner, GSK.
Haleon’s other brands include Sensodyne, Voltarol, Panadol, and Centrum multivitamins. The cash generated from the sale will be used to reduce its leverage. This will help it achieve a target for net debt/adjusted earning of less than three times in this year.
Nicotinell is one of the brands that the company has considered selling. Haleon, an Indian pharmaceutical company, was said to have been in discussions with Dr Reddy’s Laboratories to sell Nicotinell. However, the price would likely be lower than the $800m asking price that had been suggested during the summer. Haleon sold Lamisil to Karo Healthcare in July for £235million.
Haleon shares fell by 1 1/4p or 0.4 percent to 312p. These shares for the first listed consumer healthcare company began their life on the stock exchange at 330p following the company’s separation with GSK. However, they have been affected by debt and the fact that Pfizer and GSK still hold large stakes.
Haleon CEO Brian McNamara (57) said that while ChapStick was a popular brand loved by consumers worldwide, it wasn’t a focus of Haleon. We can simplify our business, pay off debt faster and simplify the company by selling ChapStick. ChapStick brought in £112million last year.
Bruno Monteyne of Bernstein said that this deal “helps to eliminate one concern about Haleon.” Investors will benefit from higher dividends and buybacks sooner if deleveraging is completed sooner. Haleon is expected to take part in the share placements of Pfizer and GSK by 2024. This will allow them to perform buybacks with a discount.”
GSK agreed last week to further reduce its Haleon stake to approximately 4.2 per cent in a placement priced at 326p each share. Pfizer still holds a 32% stake.