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GSK Completes Demerger of Consumer Healthcare Business

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GSK plc (GSK - Free Report) recently announced that it has completed the spin-off of its consumer healthcare segment into a new standalone company called Haleon. Following the demerger, Haleon is the world’s largest consumer healthcare business.

Per GSK, this separation will help the company to not only focus on its existing business segments, which comprise Pharmaceuticals (respiratory, HIV, immuno-inflammation and oncology) and Vaccines, but also improve their performance and competitiveness, thereby maximizing shareholders’ value.

Shares of Haleon have already been listed on the London Stock Exchange (LSE) and started trading on Jul 18. However, Haleon failed to meet investors’ expectations, when it closed at a price, which valued the newly formed company at around £30.5 billion, lower than the £50 billion offer that was rejected by GSK at the onset of the year.

Haleon, by way of American Depositary Shares (ADSs), will also trade in the United States. One ADS of Haleon (representing two ordinary shares of the entity) will trade on the NYSE under the ticker name “HLN” in a regular way from Jul 22.

Prior to the demerger, the consumer healthcare segment was a joint venture between GSK and Pfizer (PFE - Free Report) . While GSK held 68% stake in the joint venture, Pfizer held the remaining 32% stake. Following the demerger, Pfizer holds a 32% stake in Haleon while GSK holds a 13.5% stake. The remaining stake in Haleon is held by the shareholders of GSK. All the shareholders of GSK received one share of Haleon for each GSK share held on Jul 15, 2022. Pfizer announced plans to sell its overall stake in Haleon last month.

In the year so far, stock price of GSK has declined 8.4% against the industry’s 3.5% rise.

In a separate press release, GSK announced that it has completed its share consolidation following the demerger.

GSK has issued four new ordinary shares of 31.25 pence each for every five existing ordinary shares of 25 pence each. With regard to ADS issued by GSK, four new ADSs will be issued for every five existing ADSs of GSK trading on the NYSE. GSK ADS holders can start trading the new ADSs in a regular way from Jul 22.

A similar plan has also been proposed by the pharma giant Johnson & Johnson (JNJ - Free Report) which also announced its plans last year to separate its Consumer Health segment into a new, publicly-traded company, leaving behind a new J&J with its Pharmaceuticals and Medical Device units. Like GSK, J&J also believes that the separation of the Consumer Health unit will drive growth and unlock significant value as its Pharmaceutical and Medical Devices units are relatively higher growth and higher-margin businesses. J&J expects to complete this transaction by next year.

Zacks Rank & Stock to Consider

GSK currently carries a Zacks Rank #3 (Hold). Merck (MRK - Free Report) , carrying a Zacks Rank #2 (Buy) at present, is a stock worth considering in the same sector. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Estimates for Merck’s 2022 earnings have increased from $7.28 to $7.31 in the past 60 days. Shares of MRK have risen 20.5% in the year-to-date period.

Earnings of Merck beat estimates in three of the last four quarters and missed the mark on one occasion, the average surprise being 13.4%. In the last reported quarter, MRK delivered an earnings surprise of 18.2%.


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