British drugmaker GSK spun off its consumer health business on Monday, Europe’s biggest IPO in more than a decade, but the market value of £30.5bn was far less than the price its rival had offered. Unilever earlier this year.
The new company, Haleon, becomes the world’s largest independent business in consumer health, with brands such as Sensodyne toothpaste and Advil pain relievers.
Haleon shares started trading at 330 pence, giving it a market valuation of about 30.5 billion pounds ($36.4 billion) and placing it among the top 20 companies by market capitalization in the FTSE London index.
Haleon’s placement price was largely adjusted to market expectations, according to two bankers involved in the deal. However, its current valuation is lower than expected.
Even taking into account the roughly £10bn of debt, that’s below the £50bn enterprise value Unilever was willing to pay for the business earlier in the year. GSK rejected the offer as too low.
“Investors might wonder why GSK didn’t accept Unilever’s much higher offer,” Danni Hewson, an analyst at AJ Bell, wrote in a note.
GSK shares rose in early trading but started to fall later. For its part, Haleon shares were trading down almost 3% from the opening price, but it is difficult to draw conclusions without several days of trading, according to investors.
“It usually takes some time for spin-off prices to settle as there isn’t normal liquidity yet,” said Tineke Frikee, a portfolio manager at Waverton Asset Management that holds shares in GSK and Unilever.
Haleon’s split is the result of a lengthy review of GSK, which will now focus exclusively on vaccines and prescription drugs
The company has been helped by recent successes in clinical trials, including its potential respiratory syncytial virus (RSV) vaccine, and by merger and acquisition activity.
