Reckitt Benckiser drug spin-off confirmed

Reckitt Benckiser has just confirmed its soon-to-be-demerged pharmaceuticals business should hit the stockmarket on 23 December under its new name Indivior. Will it be an early Christmas present for investors, or will they be left reaching for a packet of Reckitt's Nurofen headache pills?

The planned demerger was flagged in July as part of a strategy overhaul, and was initially scheduled to take a year. But the process was accelerated last month in order to quickly streamline the main business, which makes its money selling household products like Cillit Bang, Dettol and Gaviscon.

"The board of RB considers that the profile and potential risks and rewards of Indivior, as a specialty pharmaceuticals company, will be better understood as a standalone listed business," explained Reckitt. "RB will continue its focus as a consumer health and hygiene company."

If shareholders approve the move next month, they will receive one Indivior share for each RB share they hold. "RB shareholders will benefit from the single-minded focus of top management on its core business," said the firm. A detailed prospectus outlining the level of net much debt assigned to Indivior and what dividend policy it will adopt, is expected later on Monday.

But there is speculation that if, as expected, many existing Reckitt shareholders sell their Indivior shares, the business could be attractive to a predator.

Clearly, Reckitt's management now thinks the drugs division is strong enough to stand on its own two feet. Suboxone Film, its medicine used to treat addiction to heroin and other opioids, has 60% of the US market. But the tablet version could experience increasing volatility as generic versions compete for business.

Reckitt is also trying to free itself up for continued expansion in the US and globally, and it has already invested in a pipeline of new and developed products to launch over the next five years.

Last year, the drugs unit reported net revenues of $1.2 billion, with 80% from the US, giving pre-tax profit of $695 million (£444.1 miilion). The standalone business will continue to be headed up by Shaun Thaxter who has been at the helm since 2003 and clearly knows his stuff.

"Indivior, under the leadership of Shaun Taxter, has built a global, industry leading company in addiction treatment," said chairman of the new company Howard Pien. "The business has a profitable opioid addiction business and a strong pipeline that has the potential to revolutionise how the chronic disease is treated worldwide."

Reckitt recovered from its month low of 4,981p in the days after the release of its third-quarter results late October to 5,297p.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.