ALEX BRUMMER: Haleon is just the latest in a line of IPO flops damaging the reputation of the London Stock Exchange
The float of Haleon on the London market, after the consumer healthcare concern was split from GlaxoSmithKline (GSK), was meant to be a great lift-off for the FTSE 100.
Among other things, it would have been a sharp reminder to Masayoshi Son and SoftBank that the City would be a safe space to refloat Arm Holdings to achieve the kind of price its smart-chip technology deserves.
Instead, the Haleon float has subsided in spite of its shiny collection of consumer healthcare brands, strong cash flows and the encouraging valuations of other similar branded firms including Procter & Gamble and Reckitt Benckiser.
Flop: The float of Haleon on the London Stock Exchange was supposed to promote the City as a safe space for firms’ initial public offerings
Haleon chairman Dave Lewis, who turned the market tide at Tesco, and chief executive Brian McNamara have a mammoth task if they are to change investor opinion.
The valuation placed on Haleon in July was £40billion (including £10billion of debt loaded on to its balance sheet). In trading this week Haleon was valued at £24.1billion.
That is less than half the £50billion price put on the enterprise when Unilever made its bid in January of this year.
Whoever prematurely leaked details of Unilever’s offer, effectively killing it after investors such as Terry Smith opposed the deal, deprived GSK and minority Haleon-owner Pfizer of a windfall.
Given the current bargain basement price of Haleon it might be thought that Unilever would come racing back.
But boss Alan Jope was so stung by rejection that it left the Dove-to-Ben & Jerry’s owner with very little wriggle room even if Takeover Panel rules were allowed to run their course.
Haleon and GSK have both been stung by legal uncertainties, mentioned in the float prospectus, surrounding the manufacture, sales and marketing of the ulcer and indigestion compound Zantac.
Both companies, forcefully, have rejected claims that Zantac causes cancer, quoting extensive studies by US and European drug regulators.
Claimants suffered a setback in the Illinois courts this week when Joseph Bayer dropped a claim that he developed oesophageal cancer from Zantac use, for ‘personal health reasons’.
Zantac developed by GSK has been sold by various pharma giants over the years, including Pfizer and Sanofi, as well as generic manufacturers. GSK asserted it did nothing to settle the case.
Bloomberg reports that generic firms including Israel’s Teva, Dr Reddy’s Laboratories and others agreed to pay the plaintiff $500,000 (£415,000) to stop the matter going to trial.
But this is just the start, with more than 2,000 lawsuits consolidated into one case to be heard on September 20 unless a settlement is reached.
The legal burden is likely to remain a shadow over Haleon. The IPO flop unfortunately feeds into a narrative – encouraged by stock market duds such as Deliveroo and the Hut Group – that the London Stock Exchange is not fit for purpose when it comes to initial public offerings.
That is not a good post-Brexit message.
Inflation tips
If you thought it was just ordinary citizens who are suffering from the leap in British consumer prices to 10.1 per cent, think again.
What about the poor, helpless chief executives of global companies? Don’t worry. The brilliant minds at McKinsey have come out with a cut-out-and-keep guide on how to cope.
Suppliers need to redesign products and services to deliver better value.
Chief executives need to take control of logistics, previously the task of managers lower down the food chain, reform procurement to cut costs and, in tight labour markets, focus on lifestyle needs to retain workers, not just on pay.
McKinsey recommends prices are set to ‘strengthen customer relations’.
That may mean designing products with lower margins. Time investors recognised that companies are not just about earnings and dividends.
Reality TV
On the same track, our biggest terrestrial broadcaster was punished by the market because chief executive Carolyn McCall invested in streaming service ITVX.
But data from regulator Ofcom shows that 16-to-24-year-olds prefer streaming and watch seven times less broadcast TV than the over-65s.
If there is to be a future for the UK’s flagship commercial broadcaster (beyond creation and production) it needs to invest for the long-term. Analysts need to wake up and look at the data.