GSK rejects Unilever’s £50bn offer for consumer unit

GlaxoSmithKline has rejected a £50bn bid from Unilever to acquire its consumer health joint venture with Pfizer, saying it “fundamentally undervalued” the business and its future prospects.

GSK said it had turned down three approaches, including a £50bn offer comprising £41.7bn in cash and £8.3bn in Unilever shares, received on December 20.

“In this case, after careful review of Unilever’s proposals, we decided that they fundamentally failed to recognise the value and the potential we see for Consumer Healthcare,” said Emma Walmsley, GSK’s chief executive.

“That is why the Board rejected them. Instead, we are keeping our focus on executing our plan to separate Consumer Healthcare, through a demerger in the middle of this year — to create a new world-leading consumer health company listed in London and New York.”

Unilever said earlier on Saturday that it had “approached GSK and Pfizer about a potential acquisition of the business”.

GSK Consumer Healthcare is a leader in the attractive consumer health space and would be a strong strategic fit as Unilever continues to reshape its portfolio. There can be no certainty that any agreement will be reached,” Unilever added.

Unilever has made multiple attempts to engage with GSK over the past few months, making a number of approaches in that period, according to people with direct knowledge of the matter. Goldman Sachs is advising GSK. Centerview Partners and Deutsche Bank are working with Unilever.

The £50bn bid was first reported by the Sunday Times.

The prospect of a deal being reached depends on what the market and GSK believe is the value of the consumer business. Analyst estimates range from £37bn to £48bn for the unit. GSK said on Saturday that it expects the unit’s sales to grow 4 to 6 per cent over the medium term, at constant exchange rates.

Unilever declined to comment on whether it would return with a higher bid.

GSK has been preparing to spin off the division, a joint venture with Pfizer that makes Panadol painkillers, Theraflu cold and flu medicine, and Otrivin decongestant. The new company would be led by GSK insider Brian McNamara and its board is due to be chaired by Dave Lewis, the former Tesco chief executive who held senior executive roles at Unilever.

Activist investors including US hedge fund Elliott Management have put pressure on Walmsley to explore other options — including a sale — if it can generate greater returns for shareholders. Walmsley plans to use proceeds from the spin-off to bolster the pharma and drugs business’ lacklustre pipeline.

Marco Taricco, co-chief investment officer at Bluebell Capital Partners — one of the activist investors pushing for GSK to consider a sale of the unit — said the bid was “proof that such a high quality business has the potential to attract interest by strategic and financial buyers”. 

Pfizer owns 32 per cent of the division, which GSK has said it will list in London this year, although private equity groups have also looked at a potential purchase.

A Unilever buyout would be one of the largest ever on the London market, bringing together the FTSE 100’s third-largest company with a division that, if independent, would be in its top 20. It would be rivalled only by Vodafone’s acquisition of Germany’s Mannesmann in 1999 and AB InBev’s purchase of SABMiller in 2016.

The approach came as Unilever, already one of the world’s largest consumer goods groups, seeks to renew momentum after a period of tepid sales growth.

Its share price has languished since chief executive Alan Jope took over in 2019, and top-10 investor Terry Smith this week attacked the company as “labouring under the weight of a management which is obsessed with publicly displaying sustainability credentials at the expense of focusing on the fundamentals of the business”.

Other investors disputed that, but most agree the company must address its underperformance. It agreed last year to sell off its tea division, which has been a drag on growth, for €4.5bn to private equity group CVC, but has yet to make a major acquisition under Jope.

Unilever in 2018 agreed a deal to buy GSK’s health food drinks business, including the Horlicks brand, in India and other Asian markets for €3.3bn. It has also acquired a series of small consumer health brands, including Smarty Pants, Olly and Onnit supplements and Liquid IV drinks mixes.

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