TIDMGSK
RNS Number : 5323N
GSK PLC
01 June 2022
Issued: 1 June 2022, London UK - LSE announcement
Update: Proposed demerger of the Consumer Healthcare business
from GSK to form Haleon
On 23 June 2021 at its Investor Update, GSK plc ("GSK" or the
"Company") confirmed its intention to separate its Consumer
Healthcare business from the GSK Group to form Haleon plc
("Haleon"), an independent listed company. It is proposed that the
separation will be effected by way of a demerger (the "Demerger")
of at least 80 per cent. of GSK's 68 per cent. holding in the
Consumer Healthcare business to GSK shareholders. The Consumer
Healthcare business is currently a joint venture between GSK and
Pfizer Inc ("Pfizer"), with GSK holding a majority controlling
interest of 68 per cent. and Pfizer holding 32 per cent.
GSK today confirms that the Circular in relation to the proposed
Demerger, the consolidation of GSK shares (the "GSK Share
Consolidation") and certain new arrangements with Haleon and Pfizer
to give effect to the Demerger (the "Related Party Transactions"),
as well as the Prospectus in relation to the proposed admission of
the Haleon ordinary shares, have each been submitted to the
Financial Conduct Authority ("FCA") for approval. It is expected
that the Haleon ordinary shares will be admitted to the Premium
listing segment of the Official List of the FCA and admitted to
trading on the Main Market of the London Stock Exchange on Monday
18 July 2022. A pplication will also shortly be made to list
American Depositary Shares ("ADSs") representing Haleon ordinary
shares on the New York Stock Exchange ("NYSE") ([1]) .
The proposed Demerger is the most significant corporate change
for GSK in the last 20 years, creating two new leading companies,
each with clear targets for growth and the ability to positively
impact the health and lives of billions of people.
Following the Demerger, GSK will focus purely on
biopharmaceuticals, prioritising investment towards the development
of innovative vaccines and specialty medicines. Its R&D
approach will continue to focus on the science of the immune
system, use of human genetics and advanced technologies. Over the
next five-year period, GSK expects to deliver compound annual
growth in sales and adjusted operating profit of more than 5 per
cent. and more than 10 per cent., respectively, at constant
exchange rates (with 2021 as the base year).
Haleon is a new, world-leader in consumer healthcare with a
clear strategy to outperform and run a responsible business. For
prospective investors, it will offer an exceptional and focused
portfolio of category-leading brands with an attractive footprint
and competitive capabilities; a highly attractive financial profile
of above market, medium-term annual organic revenue growth of 4 to
6 per cent. combined with sustainable moderate, adjusted margin
expansion on a constant currency basis, with strong cash generation
and conversion.
The Demerger is conditional on, among other things, the approval
by GSK shareholders of the Demerger, the GSK Share Consolidation
and the Related Party Transactions at a General Meeting, the
receipt of all necessary mandatory governmental/regulatory
approvals and the final approval of the Demerger by the GSK
Board.
The General Meeting will be held at the Sofitel London Heathrow,
Terminal 5, London Heathrow Airport, TW6 2GD on Wednesday 6 July
2022 at 2.30 p.m. (UK time). Further details will be set out in the
Circular.
Following completion of the Demerger and listing of Haleon, GSK
intends to carry out the GSK Share Consolidation. This is intended
to provide consistency in the GSK share price pre- and
post-separation (subject to interim market movements), in order to
enable comparability between the Company's earnings per share and
share price with previous periods. GSK intends to announce its
second quarter 2022 results on 27 July 2022 in which the Consumer
Healthcare business will be treated as a discontinued operation.
Alongside this, Haleon will provide a trading update ahead of
publishing its full interim results during September 2022.
As part of the Demerger, GSK proposes to enter into new
arrangements with Pfizer and Haleon and to amend certain existing
arrangements with Pfizer. Pfizer is a related party of GSK for the
purposes of the Listing Rules by virtue of its 32 per cent.
interest in the Consumer Healthcare business, which means that
these new arrangements constitute related party transactions and
require GSK shareholder approval at the General Meeting . GSK
shareholder approval is also required in relation to the Demerger,
which, due to its size, qualifies as a "Class 1" transaction for
the purposes of the Listing Rules, and the GSK Share Consolidation.
Further details on Haleon, the Demerger and the Related Party
Transactions are set out later in this release and in the
Circular.
A further announcement will be made once the Circular and the
Prospectus have been approved for publication by the FCA.
Description of GSK
GSK is a science-led global healthcare company. For further
information please visit www.gsk.com/about-us .
Description of Haleon
Haleon will be a global leader in consumer healthcare with a
focused strategy to deliver sustainable above-market growth and
attractive returns to shareholders; a world-class portfolio of
category-leading brands; an attractive geographic footprint well
placed for growth; competitive capabilities including strong
route-to-market capabilities across all channels; and brand
building and innovation capabilities alongside digital
connectivity, which offers a proposition that combines human
understanding with trusted science.
Haleon's product portfolio is split among five categories: Oral
Health, Pain Relief, VMS, Respiratory Health, Digestive Health and
Other. Haleon's largest category by revenue is Oral Health, which
accounted for 28.5 per cent. of Haleon's revenue in the year ended
31 December 2021. The Pain Relief and Digestive Health and Other
categories also significantly contribute to revenue, respectively
contributing 23.4 per cent. and 20.4 per cent. of revenue in the
year ended 31 December 2021. VMS and Respiratory Health
respectively accounted for 15.7 per cent. and 11.9 per cent. of
revenue in the year ended 31 December 2021.
In the year ended 31 December 2021 the profit before tax
attributable to Haleon was GBP1,636 million. As at 31 March 2022
the gross assets of Haleon were GBP45,023 million. On an unaudited
pro forma basis, net debt of Haleon as at 31 March 2022 would have
been GBP10,349 million. ([2])
Haleon Designate Board
A new independent board has been appointed specifically to
support the delivery and growth strategy for Haleon, under the
leadership of its Chair Designate, Sir Dave Lewis.
Name Position
------------------------ ---------------------------------
Sir Dave Lewis Non-Executive Chair**
Brian McNamara Chief Executive Officer
Tobias Hestler Chief Financial Officer
Manvinder Singh (Vindi) Senior Independent Non-Executive
Banga Director*
Marie-Anne Aymerich Non-Executive Director*
Tracy Clarke Non-Executive Director*
Dame Vivienne Cox Non-Executive Director*
Asmita Dubey Non-Executive Director*
Deirdre Mahlan Non-Executive Director*
Bryan Supran Non-Executive Director (Pfizer
Nominee)*
John Young Non-Executive Director (Pfizer
Nominee)*
*Appointment to become effective from Admission.
**Sir Dave Lewis was appointed as a director of the company on
23 May 2022. His appointment as Non-Executive Chair takes effect on
Admission.
Haleon Senior Management
In addition to the Designate Board, the current members of the
senior executive team with responsibility for day-to-day management
of Haleon's business are set out below.
Name Position
--------------------- ------------------------------------------
Dana Bolden Head of Corporate Affairs
Keith Choy Head of Asia Pacific
Bart Derde Head of Quality and Supply Chain
Amy Landucci Head of Digital and Technology
Filippo Lanzi Head of EMEA and LatAm
Jooyong Lee Head of Strategy and Office
of the CEO
Teri Lyng Head of Transformation and Sustainability
Mairéad Nayager Chief Human Resources Officer
Lisa Paley Head of US and North America
Franck Riot Head of R&D
Tamara Rogers Chief Marketing Officer
Bjarne P Tellmann General Counsel
Description of the Demerger
Structure of the Demerger
The separation will be effected via a demerger of at least 80
per cent. of GSK's interest in the Consumer Healthcare business to
Haleon plc, a listing of Haleon on the Main Market of the LSE, and
the establishment of a level 2 sponsored American depositary
receipt programme on the NYSE.
Prior to the Demerger, GlaxoSmithKline Consumer Healthcare
Holdings (No. 2) Limited ("JVCo"), the current holding company of
the Consumer Healthcare business, will pay dividends to GSK and
Pfizer, which are expected to result in GSK receiving cash proceeds
of more than GBP7 billion at separation (the "Pre-Demerger
Dividends"). Qualifying GSK shareholders will be entitled to
receive one Haleon share for each GSK share held by them and will
continue to own their GSK shares unless they sell or transfer them
in the ordinary course.
Following the Demerger, the total issued ordinary share capital
of Haleon will be held as follows:
-- at least 54.5 per cent. will be held in aggregate by GSK shareholders;
-- up to 6 per cent. will be held by GSK;
-- 32 per cent. will be held by Pfizer; and
-- certain Scottish limited partnerships (the "SLPs") set up to
provide a funding mechanism pursuant to which GSK will provide
additional funding for GSK's UK Pension Schemes, will in aggregate
hold 7.5 per cent.
In addition to receiving cash from the Pre-Demerger Dividends,
GSK intends to monetise its holding in Haleon in a disciplined
manner to further strengthen the Company's balance sheet. GSK will
also have the ability to monetise the 7.5 per cent. holding of the
SLPs, and to retain any proceeds in excess of approximately GBP1.08
billion (being the amount required to fully fund the technical
provisions funding deficits of GSK UK Pension Schemes, as
determined at the last triennial valuation). In keeping with
Pfizer's transformation into a more focused, global leader in
science-based innovative medicines and vaccines, Pfizer intends to
exit its 32 per cent. ownership interest in Haleon in a disciplined
manner, with the objective of maximising value for Pfizer
shareholders.
Conditions to completion
The Demerger is conditional on, among other things, the approval
by GSK shareholders of the Demerger, the GSK Share Consolidation
and the Related Party Transactions at a General Meeting, the
receipt of all necessary mandatory governmental/regulatory
approvals and the final approval of the Demerger by the GSK
Board.
Description of the Related Party Transactions
By virtue of Pfizer being a related party of GSK under the
Listing Rules as a result of its 32 per cent. interest in the
Consumer Healthcare business, the entry into certain new
arrangements (or amendments to certain existing arrangements)
between GSK, Haleon and Pfizer in connection with the Demerger and
separation constitute related party transactions for the purposes
of Chapter 11 of the Listing Rules.
In particular, while various arrangements between GSK and Pfizer
in connection with the formation of the Consumer Healthcare joint
venture and separation were approved by GSK shareholders at a
general meeting of GSK on 8 May 2019 ("Shareholder-Approved
Arrangements"), material amendments to the Shareholder-Approved
Arrangements and certain new arrangements with Pfizer outside the
scope of these Shareholder-Approved Arrangements (and otherwise not
exempt under the Listing Rules) require Shareholder approval. These
related party transactions, which are aggregated in accordance with
Chapter 11 of the Listing Rules, require the approval of GSK
shareholders.
Specifically, the Related Party Transactions comprise:
Pfizer SAPA Amendment Agreement
GSK, Pfizer and Haleon have agreed to certain amendments to the
stock and asset purchase agreement dated 19 December 2018 and
amended and restated on 31 July 2019 between Pfizer, GSK,
GlaxoSmithKline Consumer Healthcare Holdings Limited and JVCo (the
"Pfizer SAPA"), including amendments:
-- to reflect the proposed separation of the Haleon Group to
operate as a business independent from the GSK Group and the Pfizer
Group;
-- that are required as a result of overlap with certain other
agreements to effect the proposed Demerger and the proposed
separation of the Haleon Group;
-- to update the liability framework established by the Pfizer
SAPA to reflect the proposed separation of the Haleon Group.
Tax Covenant
Pfizer, GSK and Haleon have agreed to allocate tax risk
associated with the Demerger, and certain associated transactions
and reorganisation steps through indemnities from: (i) GSK and
Pfizer to Haleon; and (ii) from Haleon to each of GSK and
Pfizer.
Orderly Marketing Agreement
GSK, Pfizer and each of the SLPs have agreed to regulate sales
of interests in Haleon shares (including ADSs) by each of them,
including ensuring that when one party proposes to sell Haleon
shares the other parties have the opportunity to participate in any
such sale. The parties have undertaken not to sell any Haleon
shares without following the procedure set out in the Orderly
Marketing Agreement, which requires Pfizer to give notice to GSK
(where Pfizer and/or its associates are proposing to sell Haleon
shares) and GSK to give notice to Pfizer (where GSK, one or more of
the SLPs and/or their respective associates are proposing to sell
Haleon Shares) of any such proposed new sale of Haleon shares. The
extent to which each party is entitled to participate in any
proposed sale of Haleon shares notified to it, should it choose to
do so, is determined in accordance with an allocation mechanism
included in the agreement.
Lock-up Deed
Pfizer, GSK and each of the SLPs have agreed to a lock-up, being
the prohibition of offers, sales, loans, pledges or other disposals
of Haleon shares and ADSs in respect of Haleon shares by GSK,
Pfizer or the SLPs during the period commencing on completion of
the exchange transactions to establish the interests of each of
GSK, Pfizer and the SLPs in Haleon and ending on the day after the
earlier of: (i) 10 November 2022; and (ii) the release by Haleon of
a quarterly trading update in respect of a quarterly period ending
after 30 June 2022.
Pfizer Exchange Agreement
To establish its interest in Haleon, Pfizer has agreed to
exchange its ownership interest in PF Consumer Healthcare Holdings
LLC (the Pfizer Group subsidiary that holds direct ownership
interests in JVCo) for: (i) Haleon shares constituting in aggregate
32 per cent. of Haleon's ordinary share capital at Admission; and
(ii) non-voting preference shares in Haleon.
NEBA Amendment Agreement
Pfizer and GSK have agreed to amend the terms of the original
net economic benefit letter agreement between Pfizer, GSK and JVCo
dated 31 July 2019. These amendments include changes to the
governance, operation and expected transfer timings of certain
businesses, assets, liabilities and employees that were included in
the original perimeter of the GSK/Pfizer joint venture as
contemplated in the Pfizer SAPA, but for certain regulatory and
other local market commercial reasons will not legally transfer
from the GSK Group to the Haleon Group until a date following the
Demerger.
Each of the above are described in further detail in paragraph 7
of Part 7 (Additional Information) of the Circular.
Disclaimer
GSK makes no representation or warranty as to the
appropriateness, accuracy, completeness or reliability of the
information in this announcement.
This announcement is for information purposes only and is not
intended to and does not constitute or form part of any offer or
invitation to purchase, otherwise acquire, subscribe for, sell,
otherwise dispose of or issue, or any solicitation of any offer to
sell, otherwise dispose of, issue, purchase, otherwise acquire or
subscribe for, any security.
Prior to making any decision in relation to the Demerger,
shareholders should read the Circular and the Prospectus in their
entirety, including the information incorporated by reference.
Shareholders must rely upon their own examination, analysis and
enquiries of GSK and the terms of the Circular and Prospectus,
including the merits and risks involved.
Information regarding forward-looking statements
This announcement contains statements that are, or may be deemed
to be, "forward-looking statements". Forward-looking statements
give GSK's current expectations or forecasts of future events,
including strategic initiatives and future financial condition and
performance relating to Haleon and/or GSK. An investor can identify
these statements by the fact that they do not relate strictly to
historical or current facts. They use words such as 'anticipate',
'estimate', 'expect', 'intend', 'will', 'project', 'plan',
'believe', 'target', 'aim', 'ambition' and other words and terms of
similar meaning in connection with any discussion of future
operating or financial performance. In particular, these include
statements relating to future actions, plans, objectives, goals,
event or intentions. Other than in accordance with its legal or
regulatory obligations (including under the Market Abuse
Regulation, the UK Listing Rules and the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority), GSK
undertakes no obligation to update any forward-looking statements,
whether as a result of new information, future events or otherwise.
The reader should, however, consult any additional disclosures that
GSK may make in any documents which it publishes and/or files with
the SEC. All readers, wherever located, should take note of these
disclosures. Accordingly, no assurance can be given that any
particular expectation will be met and investors are cautioned not
to place undue reliance on the forward-looking statements.
Forward-looking statements are subject to assumptions, inherent
risks and uncertainties, many of which relate to factors that are
beyond GSK's control or precise estimate. GSK cautions investors
that a number of important factors, including those in this
document, could cause actual results to differ materially from
those expressed or implied in any forward-looking statement. Such
factors include, but are not limited to, those discussed under Item
3.D 'Risk Factors' in GSK's Annual Report on Form 20-F for 2021,
GSK's Q1 Results for 2022 and any impacts of the COVID-19 pandemic.
Any forward-looking statements made by or on behalf of GSK speak
only as of the date they are made and are based upon the knowledge
and information available to the directors on the date of this
announcement.
Assumptions
All outlooks, ambitions considerations in relation to GSK should
be read together with pages 5-7 of the Stock Exchange announcement
relating to an update to investors dated 23 June 2021 and the
Guidance, assumptions and cautionary statements of GSK's Q2 2021
earnings release.
In outlining the medium term outlooks and growth ambitions for
Haleon, GSK has made certain assumptions about the consumer
healthcare sector, the different geographic markets and product
categories in which Haleon operates and the delivery of revenues
and financial benefits from its current product range, pipeline and
integration and restructuring programmes. These assumptions, as
well as the outlooks, ambitions or considerations (as applicable)
for organic annual sales growth, adjusted operating margin
expansion, dividend payout ratio, cash generation/conversion and
deleveraging, assume, among other things, no material interruptions
to the supply of Haleon's products, no material mergers,
acquisitions or disposals, no material litigation or investigation
costs (save for those that are already recognised or for which
provisions have been made), no material changes in the regulatory
framework for developing new products and retaining marketing
approvals, no material changes in the healthcare environment, no
unexpected significant changes in Haleon's end markets, no
unexpected significant changes in pricing as a result of
government, customer or competitor action, no unexpected
significant geopolitical developments, no material changes in
foreign currency exchange rates and no material changes in the
impacts of the COVID-19 pandemic. These outlooks, ambitions and
considerations also assume the successful delivery of the
separation programme to deliver the demerger of Haleon and the
realisation of its anticipated benefits. The outlook and growth
ambitions are given at constant exchange rates.
GSK enquiries:
Media enquiries: Tim Foley +44 (0) 20 8047 (London)
5502
Kathleen Quinn +1 202 603 5003 (Washington
DC)
Analyst/Investor Nick Stone +44 (0) 7717 618834 (London)
enquiries:
James Dodwell +44 (0) 20 8047 (London)
2406
Mick Readey +44 (0) 7990 339653 (London)
Josh Williams +44 (0) 7385 415719 (London)
Jeff McLaughlin +1 215 751 7002 (Philadelphia)
Sonya Ghobrial +44 (0) 7823 523562 (Consumer)
Emma White +44 (0) 7823 523562 (Consumer)
Rakesh Patel +44 (0) 7552 484646 (Consumer)
Registered in England & Wales:
No. 3888792
Registered Office:
980 Great West Road
Brentford, Middlesex
TW8 9GS
[1] It is expected that Haleon ADSs will commence "regular-way"
trading on the NYSE at market open on 22 July 2022. In addition, we
expect that Haleon ADSs will begin trading on a "when-issued" basis
on the NYSE from market open on 18 July 2022 up to and including 21
July 2022.
[2] This pro forma financial information is unaudited. It has
been prepared on the basis of the unaudited interim financial
information of Haleon as at 31 March 2022, the date to which the
latest unaudited financial information in relation to Haleon was
prepared. This pro forma information is shown for illustrative
purposes only and because of its nature addresses a hypothetical
situation. It does not represent Haleon's actual financial position
or results. It may not, therefore, give a true picture of Haleon's
financial position or results nor is it indicative of the results
that may, or may not, be expected to be achieved in the future.
Please refer to the Prospectus for further details.
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END
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