Haleon sells nicotine replacement business for £500m

Since its separation from GSK almost two years ago, Haleon has been selling non-core brands to manage its portfolio and reduce debt.

• Vivek Mishra
• 01 July, 2024

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By: Vivek Mishra

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

Since its separation from GSK almost two years ago, Haleon has been selling non-core brands to manage its portfolio and reduce debt. The separation resulted in significant debt for Haleon, primarily due to bond issues to pay approximately £10 billion in dividends to GSK and Pfizer, GSK’s joint venture partner, reported The Times.

Haleon has been reducing its debt and has already sold the ChapStick brand to Suave Brands for over £393.7m. Last year, it sold Lamisil, an antifungal treatment, to Karo Healthcare for £235m.

For over a year, Haleon has been exploring the sale of its nicotine business, which includes the Nicabate, Habitrol, and Thrive brands.

Last summer, it was reportedly seeking £800 million for this business. The nicotine portfolio includes gums, lozenges, and patches across about 30 markets and is part of Haleon’s digestive health and other division.

Brian McNamara, Haleon’s CEO, stated that the sale aims to make the company more “agile and competitive” and noted that while the nicotine portfolio has “great brands, these are not core for us.” He previously mentioned that this was not part of a broad divestment programme to clean up the portfolio.

Nicotinell is the second-largest brand globally, excluding the US. The nicotine business generated £217 million in revenue last year, approximately 2 per cent of group sales.

Analysts at Bernstein expect the sale to reduce Haleon’s debt ratio by 0.2 times this year, down from 2.8 times, considering the company’s targeted £500 million share buyback. Bernstein added that by selling low-growth assets and investing in new growth areas, Haleon can maintain sustainable 5 per cent organic growth.