GlaxoSmithKline’s personal health spinoff is beginning life with a target on its back. Haleon, maker of Advil painkillers and Sensodyne toothpaste, will next month list in London, and could be worth 42 billion pounds. But with two large shareholders keen to sell out, lots of debt and a challenging consumer backdrop, it may not stay single for long.
for Haleon in January on the grounds that it undervalued the business. Assume new Haleon CEO Brian McNamara grows revenue by 5%, the middle of his 4% to 6% target range, and sales for this year will reach 9.5 billion pounds. On the division’s historic 25% margin, EBITDA could total 2.5 billion pounds. Put that on the same 17 times multiple as Colgate Palmolive
, which has a similar growth profile, and the business would be worth around 42 billion pounds including debt.Still, Haleon has some unique risks. Pfizer and GSK both plan to offload their stakes in coming years. That roughly 40% share overhang will depress its stock. Haleon will also be shouldering a heavy debt burden, worth 4 times its expected EBITDA in 2022, compared to Colgate which operates on just 1.
on 2 times. That extra debt may make it hard for Haleon to invest in brands like Advil, which were slowing before the pandemic, or defend market share if cash-strapped consumers choose to dump pricey branded products. Those factors may lead some investors to steer clear, depressing Haleon’s valuation. It could prove more appealing to a rival. Unilever may struggle to mount another bid, given its shareholders’ opposition to the last one, but Procter & Gamble
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