Pfizer Inc. (NYSE:PFE) revealed its plans to sell its 32% ownership stake in Haleon in a disciplined manner, citing maximization of value for Pfizer shareholders as the reason.
Haleon is due to be listed on the London Stock Exchange (LSE) in July. It is a newly formed independent company that will hold the joint consumer healthcare business of GlaxoSmithKline (GB:GSK) and Pfizer.
Background
On July 31, 2019, Pfizer and GSK formed a joint venture (JV) combining their respective Consumer Healthcare businesses, wherein Pfizer and GSK received 32% and 68% ownership interests, respectively.
With the aim of focusing on its key vaccines and prescription drugs businesses, GSK proposed the separation of the GSK Consumer Healthcare business from the GSK Group. Haleon will result from the demerger and spin-off of approximately 80% of GSK’s ownership interest in the business to GSK’s shareholders.
Strikingly, GSK rejected a £50 billion (or $63 billion) offer for Haleon from Unilever (GB:ULVR) last year, as it believed the offer undervalued the firm’s true valuation.
On June 1, 2022, Haleon, the maker of Sensodyne toothpaste and Advil painkillers, published a prospectus in connection with the demerger and LSE listing. Furthermore, GSK is expected to apply for the listing of Haleon American Depositary Shares (ADS) on the New York Stock Exchange (NYSE) soon.
All the stakeholders of Haleon, including Pfizer and GSK, had initially committed to a lock-up period until November to save the share price of the newly-listed entity. Pfizer stated that it always intended to sell its Haleon stake over time.
Upon completion of the demerger and listing of Haleon, Pfizer will appoint two members to its new board. Furthermore, the Chief Executive of GSK Consumer Healthcare, Brian McNamara, is due to be appointed as CEO of Haleon.
Following the transaction, GSK, along with other related entities, will retain a 13.6% ownership interest in Haleon.
Wall Street’s Take
Recently, J.P. Morgan analyst James Gordon reiterated a Hold rating on the stock with a price target of GBp1,900 (11.25% upside potential) and a Hold rating.
Overall, the stock has a Hold consensus rating based on three Buys, seven Holds and one Sell. The average GlaxoSmithKline stock forecast of GBp 1809.91 implies 5.98% upside potential from current levels.
Conclusion
GSK planned the spin-off of its consumer business to focus on its core business. To further boost its pipeline of pharmaceutical products, it is actively pursuing attractive acquisitions.
For instance, on May 31, GSK announced that it would acquire a clinical-stage biopharmaceutical company, Affinivax, for $3.3 billion to further boost its company revenues.
However, Pfizer’s plan to sell its 32% ownership stake in Haleon, may shake investors’ confidence in the newly-listed stock.
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