Haleon sells nicotine replacement business for £500 Million to reduce debt

Nicotinell, the second-largest nicotine replacement brand globally (excluding the US), was part of the divested portfolio 

Haleon, the FTSE 100 consumer healthcare group, has agreed to sell its nicotine replacement therapy business for £500 million to Dr. Reddy’s Laboratories, an Indian multinational specializing in generic drugs.

The sale is part of the company’s broader strategy to streamline its portfolio and reduce debts, The Times reported.

Following its separation from GSK almost two years ago, Haleon has been loaded with dept, which increased significantly after the issue of bonds to pay about £10 billion of dividends to GSK and its joint venture partner, Pfizer.

Since then, Haleon has been offloading non-core brands to manage its debt.

Brian McNamara, Haleon’s CEO, stated that the sale aims to make the company more "agile and competitive," noting that while the nicotine portfolio has "great brands," they are not core for the company.

Haleon has previously sold the lip balm brand ChapStick to Suave Brands, owned by American private equity firm Yellow Wood Partners, in a deal exceeding $500 million. Last July, it sold the antifungal treatment Lamisil to Karo Healthcare for £235 million.

The company has been considering the sale of its nicotine business, which also includes brands like Nicabate, Habitrol, and Thrive, for at least a year, with an initial asking price of $800 million.

The nicotine portfolio, which includes gums, lozenges, and patches across about 30 markets, forms part of Haleon’s digestive health and other division. The business generated £217 million in revenue last year, accounting for approximately two per cent of Haleon's total sales.

Haleon’s shares were slightly down by 0.3 per cent, trading at 331½p on the London Stock Exchange, close to its post-GSK separation trading price of 330p.

Nicotinell, the second-largest nicotine replacement brand globally (excluding the US), was part of the divested portfolio.

Analysts at Bernstein has anticipated that the sale would reduce Haleon’s debt ratio by 0.2 times this year, down from 2.8 times, which includes the company’s currently targeted £500 million share buyback target.

Bernstein also noted that by offloading low-growth assets and investing in new growth areas, Haleon can sustain a five per cent organic growth rate.