With U.K. consumer health giant Haleon slimming down and India’s Dr. Reddy’s Laboratories beefing up its over-the-counter offerings, the two have arrived at a deal that makes sense for both.
Haleon has continued its push to divest, selling its nicotine replacement therapy (NRT) business outside of the United States to Dr. Reddy’s for 500 million pounds ($633 million).
The unit, which generated sales of 217 million pounds ($274 million) last year, is powered by the Nicotinell brand of products, primarily lozenges, which help curb nicotine cravings. In Europe, it ranks among the top 15 over-the-counter products, Dr. Reddy’s said. Worldwide, Nicotinell is the second-leading NRT in sales.
The deal, which includes an up-front payment of 458 million pounds ($579 million) and is expected to close in the fourth quarter, was not a surprise. Five months ago, Sky News reported discussions between the companies and that Dr. Reddy’s was the “frontrunner” to acquire the business.
“(The deal) is consistent with our strategy as we implement change to become more agile and competitive,” Haleon CEO Brian McNamara said in a release. “Whilst this business has great brands, these are not core for us, but I’m sure they will continue to flourish given the focus and capability of Dr. Reddy’s.”
Both companies saw less than a 1% drop in their share price by mid-morning on Wednesday.
Haleon, a consumer health powerhouse formed as a result of the combination of Pfizer and GSK's over-the-counter businesses, was spun out of GSK in 2022. Since then, the London-based firm has maneuvered to pare down its portfolio.
In January, Haleon sold its ChapStick brand of products to Suave Brands Company for $430 million. Among Haleon’s top products are the Sensodyne toothpaste brand, Centrum multivitamins and Tums antacids.
As for Dr. Reddy’s, in addition to its core operations in generics, active pharmaceutical ingredients and biosimilars, it has prioritized consumer healthcare as a growth driver. Two months ago, the Hyderabad-based company announced a joint venture with Nestle to combine several nutritional brands.
“Consumer healthcare is a growing and sustainable business with favorable long-term trends. The business to be acquired from Haleon has maintained steady sales and strong profitability over the years,” Erez Israeli, Dr. Reddy’s CEO, said in a release. “We believe we can unlock more value, grow the portfolio further, and increase consumer access around the world to these global brands.”