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GSK Rejects Unilever Bid for Consumer Health Arm

17.01.2022 - GlaxoSmithKline said it has received and rejected three bids from consumer products giant Unilever to acquire its consumer drugs arm. The latest offer, worth £50 billion (£41.7 billion in cash and £8.3 billion in Unilever shares), fundamentally undervalues" the business,” the UK pharma said.

For some time, GSK has been planning to spin off the majority-owned consumer business, part of a 68:32 joint venture with US-based Pfizer, which had sales of £9.6 billion in 2021. Commenting on the bid, the drugmaker, which for some time has been under activist investor pressure, said it remains focused on the spin-off plans, which it insisted are still on track to be achieved in mid-2022.

Unilever said the drugmaker’s consumer activities would be a “strong strategic fit” with its own franchise as it continues to reshape a portfolio that encompasses food, beauty and home care brands such as Dove soap or the Marmite sandwich spread popular in the UK and countries such as Australia. GSK’s slate includes products such as the OTC painkiller Panadol and the Sensodyne toothpaste.

According to the UK newspaper Sunday Times, the Unilever bid did not include a takeover premium or recognition of synergies so that the London-headquartered consumer group could conceivably make a higher offer. Last year, analysts valued the GSK business at £45 billion, and opinion writers this weekend warned that Unilever CEO Alan Jope could lose out to other potential deal-makers if the company doesn’t up the ante.

A transaction of this size could be the largest globally since the beginning of the pandemic, reports suggest. M& activity in the field, along with sales of consumer health and beauty products, has lagged as more people work from home, and social activities are curbed. Like GSK’s Emma Walmsley, Jope, is under shareholder pressure to bolster revenue. The conglomerate’s share price has lagged of late, while rival P&G, for example, has gained.

British fund manager Terry Smith, whose Fundsmith vehicle is a top-10 Unilever investor, has criticized Unilever for promoting its sustainability credentials at the expense of performance, as news agencies noted.

Jope nevertheless is credited with continuing to streamline Unilever’s business. After hiving off the sale of the majority of the company’s tea franchise to private equity investor CVC Capital Partners for €4.5 billion, he is now seen as seeking to offload a portfolio of slow growing beauty brands.

GSK said it plans to share further details of the strategy, brands, capabilities and operations of its consumer healthcare business, including detailed financial information and future growth ambitions, at a virtual Capital Markets Day to be held on Feb. 28.

A deal between Unilever and GSK, if one does takes place, would be the second between the two companies in four years. In 2018, the consumer group bought Glaxo’s health food drinks business, including Horlicks, in India and other Asian markets for € 3.3 billion.

Author: Dede Williams, Freelance Journalist

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