Pfizer to sell stake in GSK's consumer health business after it lists

© Reuters. FILE PHOTO: A person walks past a Pfizer logo amid the coronavirus disease (COVID-19) pandemic in the Manhattan borough of New York City, New York, U.S., April 1, 2021. REUTERS/Carlo Allegri/File Photo

By Natalie Grover and Ludwig Burger

LONDON (Reuters) -Pfizer plans to sell its 32% stake in Haleon, its consumer health venture with British drugmaker GSK, after the business lists as an independent company in July, GSK said on Wednesday.

GSK is spinning off Haleon, which makes Sensodyne toothpaste and Advil painkillers, so it can focus on vaccines and prescription drugs. GSK rejected a 50 billion pound ($63 billion) offer for Haleon last year, saying it undervalued the firm.

Pfizer (NYSE:PFE) has previously indicated it wanted to sell its stake in Haleon but GSK, which owns 68% of the world's biggest consumer health business, said in February that the U.S. drugmaker would keep its stake after a flotation.

A Pfizer spokesperson said on Wednesday that the U.S. company had always intended to sell its Haleon stake over time.

GSK has applied to Britain's regulator to list Haleon on the London Stock Exchange on July 18 and said it expected to apply to list it on the New York Stock Exchange as well soon.

Pfizer, GSK and other current Haleon stakeholders have committed to a lock-up period until November, so as not to jeopardise the stock of the new independent company, GSK said.

Expectations for the consumer healthcare venture's market valuation are high after GSK rejected the 50 billion pound offer from Unilever (NYSE:UL), which abandoned its pursuit in January.

If GSK secures valuation of 50 billion pounds or more it would be the largest listing by market capitalisation on the London Stock Exchange in at least two decades, excluding joint listings made via the Shanghai London Stock Connect project.

As a comparison, mining and commodity trading company Glencore (OTC:GLNCY) was valued at 36.7 billion pounds when it listed in London in 2011.

BOARD MEMBERS

GSK also said in February that once Haleon was listed as a separate company, Pfizer would appoint two members to its new board and the British drugmaker would relinquish its right to representation.

At the moment, Brian McNamara, chief executive of GSK consumer healthcare, has been designated as chief executive of Haleon once it has listed while GSK's Tobias Hestler is the designated chief financial officer.

The Pfizer spokesperson said the company was given the right to board seats when the venture was initially announced several years ago and, for now, Pfizer still had an interest in Haleon.

"We can't speculate on what happens when we divest our interest," the spokesperson said.

Haleon was poised to generate above market, medium-term annual organic revenue growth of 4% to 6%, GSK said.

Haleon's closest competitors in the non-prescription drugs, vitamins and oral care market are Procter and Gamble, Colgate-Palmolive (NYSE:CL), Johnson & Johnson (NYSE:JNJ) and Bayer (OTC:BAYRY).

Before the spinoff, the holding company for Haleon will pay dividends to GSK and Pfizer. GSK said it would receive cash proceeds of more than 7 billion pounds at separation.

After the spinoff, at least 54.5% of Haleon's total issued ordinary share capital would be held by GSK shareholders and 6% would be held by GSK, the company said.

Following the split, GSK will focus on pharmaceuticals and vaccines and can no longer rely on steady consumer health sales to offset some of the unpredictability of drug development.

Under pressure from shareholders such as activist investor Elliot, GSK has sought to shore up its drug pipeline.

It has also made acquisitions, agreeing to purchase cancer drug developer Sierra Oncology (NASDAQ:SRRA) in a $1.9 billion deal and unveiling plans to pay up to $3.3 billion for vaccine developer Affinivax.

($1 = 0.7933 pounds)