Haleon sells ChapStick lip balm brand for $430mn

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Haleon has agreed to sell lip balm brand ChapStick to private equity group Yellow Wood Partners for $430mn as it seeks to simplify its portfolio and pay down debt. 

Since it was spun off from pharmaceutical giant GSK in 2022, the London-listed company has taken steps to streamline its business with a restructuring programme and job cuts, together with the disposal of non-core brands.

“While ChapStick is a great brand, much loved by consumers around the world, it is not a core focus for Haleon,” said the company’s chief executive Brian McNamara.

Last year Haleon, which manufactures consumer health goods including Sensodyne toothpaste and Panadol painkillers, sold athlete’s foot cream brand Lamisil to Sweden’s Karo Healthcare for £235mn.

At its first full-year results presentation last year, Haleon set out plans to make the business more agile, saying it expected to make £300mn in cost savings over the next three years, and spend £150mn in restructuring costs throughout 2023 and 2024.

“Selling the brand allows us to simplify our business and pay down debt more quickly,” McNamara added.

Bernstein analyst Bruno Monteyne said the deal brought the company a step closer to issuing buybacks, and would help assuage concerns about high leverage.

“The sooner deleveraging occurs, the sooner investors can be the beneficiaries of buybacks beginning, as well as higher dividends.”

The company said on Thursday that it would also receive a passive minority interest in Suave Brands, the portfolio of personal care goods Yellow Wood Partners acquired from Unilever last year, and where the ChapStick brand will now live.

The Boston-based private equity group is focused on investing in the consumer goods sector and has been snapping up unloved brands from fast-moving consumer goods giants. It acquired footcare brand Scholl from Reckitt and most recently, Unilever’s Elida Beauty portfolio.

Its acquisition of ChapStick is the group’s fifth corporate carve-out transaction in four years.

“ChapStick products are purchased by one out of every five households in the United States,” said Yellow Wood partner Dana Schmaltz, adding that the group would increase consumer marketing investments in the brand, and take “a more focused sales approach”.

Haleon was born as a joint venture between Pfizer and GSK in 2019 that sat within GSK, before it was spun off via a UK listing in 2022, leaving GSK and Pfizer with 13.5 per cent and 32 per cent of the business respectively.

Pfizer’s chief financial officer Dave Denton told the Financial Times in May that the company would exit the business in a “slow and methodical” manner, adding that the business was “not strategic”. 

Pfizer continues to hold 32 per cent of the business but, last week, GSK sold off a further 3.2 per cent of Haleon’s issued shares, having already reduced its stake to approximately 7.4 per cent since the listing.