On Wednesday, Haleon plc (NYSE:HLN) agreed to sell its nicotine replacement therapy business outside of the U.S. to Dr. Reddy's Laboratories SA, a wholly owned subsidiary of Dr. Reddy's Laboratories Limited (NYSE:RDY) for 500 million pounds (around $632 million).

The nicotine replacement therapy (NRT) portfolio consists of brands such as Nicotinell, Nicabate, Habitrol, and Thrive, which are available in gum, lozenge, and patch forms across over 30 markets. 

The 500 million pound consideration is structured as an upfront cash payment of 458 million pounds, with a further up to 42 million pounds deferred performance-based consideration payable during 2025 and H1 2026.

The transaction is expected to be completed in early Q4 2024. 

This divestment will allow Haleon to exit the nicotine replacement therapy category outside the U.S. and reduce complexity across the business, allowing it to focus more on strategic growth areas. 

The nicotine replacement therapy business had a net revenue of 217 million pounds and a net profit of 110 million pounds for the financial year ended Dec. 31, 2023.

Assuming the transaction is completed in early Q4 2024, this divestment is expected to dilute fiscal year 2024 net revenue and adjusted operating profit by c. 0.5% and c. 1%, respectively.

All other fiscal year 2024 guidance, as shared in the first quarter trading statement is unchanged. 

Brian McNamara, chief executive officer of Haleon, commented: "The divestment of Haleon's NRT business outside of the U.S. is a further example of Haleon being proactive in managing its portfolio and is consistent with our strategy as we implement change to become more agile and competitive. 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." 

Price Action: RDY stock is down 0.04% at $71.78, and HLN shares are down 0.64% at $8.52 at last check Wednesday.

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