GSK’s consumer spin-off Haleon, home to brands from Sensodyne toothpaste to Panadol painkillers, has begun trading on the London Stock Exchange in the biggest European listing in a decade.
Haleon shares started trading on Monday morning at 330p, with a market value of about £31bn, but at the end of day one it was £28.5bn.
The demerger marks GSK’s biggest corporate restructure in two decades and will allow the pharmaceutical firm, which failed to develop its own Covid-19 vaccination during the pandemic, to focus on infectious diseases and vaccines.
Haleon’s flotation is a litmus test to gauge the financial strength of the City of London and the appetite for new listings, with the company poised to join GSK on the FTSE 100 index of blue-chip shares.
The last stock market listing on a similar scale was the mining and commodity company Glencore, which debuted at a £38bn market value in 2011. It is a boost to the UK stock market at a time when the Cambridge chip designer Arm, owned by Japan’s Softbank, is expected to opt for New York for its return to public markets, although it may seek a secondary listing in London after lobbying from the UK government.
“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,” said Victoria Scholar, the head of investment at Interactive Investor. “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 (initial public offering) 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.”
Haleon, which has more than 22,000 employees across 170 markets, made £1.6bn in 2021, according to the its prospectus. The company is headed by Brian McNamara, who joined GSK from the Swiss pharmaceutical firm Novartis in 2015. The newly listed health firm will also use the expertise of former Tesco chief executive Sir Dave Lewis, who was appointed chairman designate in December last year.
“This is an important moment for the UK stock market as it has been dominated for a number of years by oil, mining and financial companies,” said Chris Beckett, the head of equity research at Quilter Cheviot. “But we will now see a new, large, consumer focused business on the UK market, giving investors an alternative to the slim pickings already available in this sector – predominantly Diageo, Unilever, BAT and Reckitt Benckiser.
“Fundamentally, this is an attractive area to be in just now. Growth prospects are good and Haleon will have strong pricing power and in a relatively unconsolidated market. This presents opportunity for organic and acquisition led growth.”
However, analysts flagged concerns over the amount of debt, likely to be £10bn, the company is taking as part of its demerger.
There is also uncertainty about when GSK and Pfizer will start selling their remaining shareholdings of the business, amounting to nearly 14% and 32% respectively. Neither will be able to start selling their holdings until November.
Earlier this year, GSK rejected several takeover bids from its rival Unilever, the last one worth £50bn, arguing that it undervalued the business and its growth prospects.
Haleon – whose name references “hale”, a synonym for healthy, and “leon”, which contains the Latin for “lion” – owns nine multinational brands, including Voltaren and Advil pain relief and Centrum supplements.
