Think back almost four years to December 2018. A certain Donald Trump was POTUS, Theresa May survived a vote of no confidence (by a vote of 200 to 117) and the term 'pandemic' was reserved for Hollywood. It was also the date GSK and Pfizer entered into a ground-breaking agreement to form a new global consumer healthcare joint venture (GSK being the majority shareholder with 68% and Pfizer holding 32%).
Fast-forward almost three years to June 2021 and not only was the world trying to come to terms with Covid-19, GSK confirmed its intention in an investor update to demerge the aforementioned JV into an independent vehicle called Haleon plc.
Earlier this month saw GSK send out shareholder documents to seek approval for this demerger, whilst Haleon plc published a prospectus to have its shares admitted to the Main Market of the London Stock Exchange and ADSs (American Depository Shares) listed on NYSE with effect from 18 July 2022.
Why is all of this important?
First, and using GSK's own words, "the proposed demerger is the most significant corporate change for GSK in the last 20 years" (remember GSK's market cap (at the time of writing) is c.£88 billion). As part of the process, it is expected to receive £7 billion in dividends prior to the demerger becoming effective.
Second, by structuring this as a demerger and putting Haleon plc on to the public markets, both GSK and Pfizer are essentially severing the umbilical cord and putting the entity into independent ownership and control. Admittedly, this emancipation process will take time, GSK parting with 80% of its interest in the JV on the demerger date, whilst Pfizer "intends to exit its 32% ownership interest in Haleon in a disciplined manner".
Third, by exiting their direct interest in the JV (and, therefore, consumer healthcare), both GSK and Pfizer have had to reinstate their intention to focus on their respective core businesses, being "biopharmaceuticals, prioritising investment towards the development of innovative vaccines and specialty medicines" for GSK and "as a global leader in science-based innovative medicines and vaccines" for Pfizer.
Fourth, and finally, by choosing to float and electing London as the primary public market, the board of Haleon plc are putting significant faith in both the London Stock Exchange and the long-term ability to access public capital. During a period of time in which most ECM practitioners would label as 'soft', this will be a welcomed shot-in-the-arm and no doubt potentially the largest transaction on the LSE during 2022.
*Note the demerger and listing of Haleon plc is subject to various conditions being satisfied, including GSK shareholder approval on 6 July 2022.