GSK completes Haleon Group demerger, analysts cite cost of living crisis concerns

GSK announced the completion of its Haleon consumer healthcare business demerger on Monday to form the new Haleon Group in the biggest European market listing in a decade.

The Haleon Group’s shares were admitted at 8am today to the Premium Listing segment of the Official List and to trading on the Main Market of the London Stock Exchange.

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Haleon shares started trading at 330p with a market value of approximately £31 billion.

“Haleon has so far got off to a mixed start. Trading started at 330p, but the shares had slipped to 326p in the first half hour of the UK market being open. Soon after they jumped to 337p,” said AJ Bell financial analyst Danni Hewson.

GSK rejected several acquisition offers from Unilever earlier this year, with its largest offer going as high as £50 billion. GSK reportedly turned down the proposal on the basis that it undervalued the company and its growth potential.

“It’s an unusual listing in that Haleon has already been subject to a £50 billion takeover bid before the demerger happened, which came from Unilever,” said Hewson.

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“Normally you would expect to see any bid action happen after the listing. That’s because there is often a period of share price weakness in the demerged entity as investors offload stock which they’ve been given for free.”

“With a market value of approximately £31 billion, investors might be wondering why GSK didn’t accept the much higher bid from Unilever.”

The potential concern among analysts is that consumers tend to select store brand pharmaceuticals over name brands in a cost of living crisis, and with inflation currently at 9.1% and set to rise to 11% later this year, the problem looks set to persist.

Investors might be wary that Haleon has chosen to launch in a time when demand for its offerings are at a lower rate than usual.

“While Haleon owns some well-known brands including Sensodyne and Advil, that may not be enough to entice a line of buyers for the stock,” said Hewson.

“Shoppers are increasingly going for supermarket own-label products as the cost of living crisis hits, with plenty of cheaper options for toothpaste and headache tablets than those sold by Haleon.”

“That raises the risk of Haleon struggling to deliver meaningful earnings growth in the near-term, which is hardly the best start to life as a standalone business.”

US Market Launch

GSK added the American Depositary Shares (ADS) representing shares of Haleon would commence “regular way” trading on the New York Stock Exchange at market open on Friday this week.

The company also expect Haleon ADS to start trading on a “when-issued” basis on the NYSE from market open today until Thursday, with each Haleon ADS representing two Haleon ordinary shares.

The general meeting on 6 July saw GSK shareholders approve the consolidation of the group’s shares, with the consolidation scheduled to take place after market close today.

GSK reported the ratio for the share consolidation could not be fixed at the current time, as it will depend on price fluctuations in the market over trading today.

The GSK share capital presently consists of 5,389,096,045 ordinary shares of 25p each, with the total number of voting rights at 5,084,190,095.

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