Reckitt Benckiser (RB), the consumer goods company most known for manufacturing Clearasil, announced last Monday that it wants to spin off its pharmaceutical business to existing shareholders within the next year, after failed attempts to appeal to any public takers.
According to Virginia-based RB, the shedding of its pharma business would allow it to focus on its core consumer health and hygiene businesses. However, the new shares would be listed in Britain. This is no surprise, following the recent so-called inversion trend — when U.S. companies relocate to EU countries seeking lower taxes, the Wall Street Journal reported.
“We believe that RB Pharmaceuticals has the potential to deliver significant long-term value creation as a stand-alone business,” Rakesh Kapoor, CEO of Reckitt Benckiser, said in a statement.
Although it hasn’t ruled out an actual sale of the business, the company prefers a demerger, which is a type of corporate restructuring in which the entity's business operations are segregated into one or more components — either within the power of current shareholders or another company.
The company also believes this strategy will “create value for shareholders as it manages the challenges and seizes the opportunities within the field of addiction” and make the spinoff company more attractive for potential business development opportunities.
In October 2013, RB performed a review of its declining pharmaceutical business, which drew most of its revenue from Suboxone, a treatment for dependence on heroin and other opiates. The company found that its pharmaceutical business’ market share for addiction therapies fell to 63 percent in the second quarter, according to the New York Times.
In addition, the company also announced Monday that its pharma sector was down five percent in the second quarter — 174 million pounds, or about $295.3 million — from the year prior. Revenue in the first half of the year was down eight percent, at £344 million. RB said they had experienced pressure on pricing, particularly due to significant growth in competition in the market.