Haleon Seizes Full Control of Tianjin TSKF: A Strategic Play for Dominance in China's Booming OTC Market

The completion of Haleon's acquisition of the remaining 12% stake in Tianjin TSKF Pharmaceutical Co. Ltd (TSKF) on June 27, 2025, marks a pivotal moment for the consumer healthcare giant. By securing full ownership of this critical joint venture, Haleon has solidified its position as a leader in China's rapidly expanding over-the-counter (OTC) pharmaceutical market, which now accounts for 40% of Haleon's China revenue. This move underscores Haleon's strategic focus on high-growth markets, operational efficiency, and shareholder value creation.

Strategic Rationale: Control and Market Momentum

The acquisition of TSKF's final 12% stake, priced at approximately £0.2 billion, was no mere financial transaction. It was a calculated step to eliminate strategic dependencies and fully harness TSKF's operational and market potential. Previously, Haleon owned 88% of TSKF after a 2024 stake purchase, but the remaining minority interest introduced complexities in decision-making and profit allocation. Full ownership now grants Haleon autonomy over TSKF's operations, enabling it to:

1. Optimize Revenue Streams: TSKF's brands, including Fenbid (pain relief) and Voltaren (anti-inflammatory), are staples in China's OTC market. Their 40% contribution to Haleon's China revenue highlights their importance. With full control, Haleon can better align TSKF's strategies with its global portfolio, such as cross-selling products like Sensodyne and Centrum.
2. Leverage China's OTC Growth: China's OTC market is projected to grow at a 9-10% CAGR through 2030, driven by urbanization, rising health awareness, and an aging population. Haleon's enhanced presence positions it to capture a larger share of this expansion.
3. Operational Flexibility: Full ownership allows Haleon to streamline supply chains, reduce costs, and accelerate innovation. For instance, TSKF's expertise in Pain Relief and Respiratory Health aligns perfectly with Haleon's global strengths, enabling synergies in R&D and distribution.

Financial Benefits: EPS Accretion and Balance Sheet Resilience

The transaction's £0.2 billion price tag, funded through Haleon's existing cash reserves and new RMB-denominated debt, reflects disciplined capital allocation. Critically, the deal is expected to be accretive to earnings per share (EPS), a clear win for shareholders. This accretion stems from:
- Eliminating minority interest dilution.
- Cost savings from operational efficiencies.
- Higher profit margins as Haleon consolidates TSKF's full earnings.

Haleon's balance sheet remains robust, with a conservative leverage ratio post-debt issuance. The use of RMB-denominated debt also mitigates currency risk, given TSKF's local revenue streams. This financial flexibility positions Haleon to pursue further acquisitions or dividends without straining liquidity.

Catalysts for Near-Term Investment Action

Two key catalysts make this an opportune time to consider Haleon:
1. Regulatory Certainty: The deal's completion, following shareholder and regulatory approvals, removes execution risk. Investors can now factor in TSKF's full earnings potential without uncertainty.
2. Market Momentum: Haleon's stock has already risen 15% year-to-date on expectations of the acquisition, but valuations remain reasonable. A comparison reveals a strong correlation, suggesting further upside as TSKF's contributions materialize.

Investment Thesis: A Buy with Long-Term Upside

Haleon's full acquisition of TSKF is a strategic home run. It consolidates control over a high-margin asset in a fast-growing market, while delivering immediate EPS accretion and long-term operational advantages. For investors, the key takeaways are:
- Short-Term: Near-term catalysts (regulatory closure, earnings upgrades) could drive Haleon's stock higher.
- Long-Term: Haleon's 40% revenue share in China's OTC market positions it to capitalize on secular trends, making it a rare “buy-and-hold” name in a volatile sector.

Risk Considerations: While risks include regulatory scrutiny in China and pricing pressures, Haleon's diversified portfolio and TSKF's entrenched market position mitigate these concerns.

Conclusion

Haleon's move to fully own TSKF is a masterclass in value accretion and strategic foresight. With China's OTC market set to boom and Haleon's balance sheet ready to scale, this acquisition is not just a consolidation—it's a launchpad for sustained outperformance. For investors seeking exposure to Asia's healthcare growth story, Haleon now offers a compelling entry point.

Recommendation: Buy Haleon shares with a 12-18 month horizon. Target price: £55-£60, reflecting 20% upside from current levels.