18th Jul 2022 18:22
(Alliance News) - Haleon PLC, the consumer healthcare product arm of GSK, started trading on Monday, becoming effectively by far the biggest new listing in London in 2022, a poor year so far for initial public offerings in a post-Brexit landscape.
Separating Haleon had a large impact on the value of GSK. The company could no longer count income or profit from the consumer health business as its own, nor its growth prospects. This meant GSK shares plunged on the day of the demerger.
Haleon will house brands such as Sensodyne toothpaste, Panadol & Advil pain relief, and Centrum vitamins, and be headquartered in Weybridge, England.
As such, GSK will conduct a share consolidation in order to counter any drop. This will reduce the number of shares in issue to increase the price of each one and return them to the price before the demerger was completed.
Haleon will go straight into the FTSE 100 index, where GSK also will remain. As a result, the lowest ranked FTSE 100 stock based on closing prices on Monday will be demoted to the FTSE 250 to make room for Haleon, index provider FTSE Russell said.
After the market close on Monday, the lowest ranking company in the FTSE 100 was North Sea-focused oil producer Harbour Energy PLC, with a market value of GBP3.05 billion. It will join the FTSE 250 index from Thursday, FTSE Russell confirmed.
The Haleon separation will take the form of a demerger of at least 80% of GSK's current 68% share of the consumer business to GSK shareholders. The remaining 32% of Consumer Healthcare is held by US peer Pfizer Inc, which will exit its 32% interest in Haleon after the float, though it cannot start doing this until November.
Haleon also will have American Depository Receipts listed in New York.
Haleon will provide consumer healthcare products in five categories: Oral Health, Pain Relief, VMS, Respiratory Health, Digestive Health and Other. Meanwhile, GSK will be a pure biopharmaceutical play, focused on vaccines and specialty medicines.
GSK shares closed down 19% at 1,385.00 pence Monday, the worst performer in the FTSE 100. Haleon shares closed at 314.00p, having opened at 330.00p giving it a market value of around GBP30 billion.
A consolidation of GSK shares will be implemented on Monday, after the market close. The ratio for the consolidation depends on "fluctuations in the volume and price of the GSK shares" on Monday. Haleon shares also will trade in New York as American depository receipts.
Current GSK shareholders will be issued one new Haleon share for each GSK share they hold. Their existing GSK shares will not be impacted, unless they sell or transfer them.
Notably, Haleon's listing will provide a stern test of financial strength of the City of London and the appetite for new IPOs. This also comes at a time when the Cambridge chip designer Arm, owned by Japan's Softbank, is expected to opt for New York over London for its return as a public entity.
The last stock market listing on a similar scale was the mining and commodity house Glencore PLC, which debuted at a GBP38 billion market value in 2011.
Victoria Scholar of interactive investor commented: "Today's listing is a win for the London Stock Exchange post Brexit, given that the UK stock market has been overly reliant on commodity and financial businesses. However for Haleon, there's no doubt this is an extremely challenging time to come to market with this year's equity market volatility that has led to a sharp decline in IPO activity. It is also a challenging time for the consumer health sector, given that inflation is close to double digits in the UK and in the US. However consumer staples and healthcare are typically more recession proof than other sectors."
GSK will announce its interim results on July 27, treating Haleon as a discontinued operation.
By Arvind Bhunjun; [email protected]
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