GSK says it rejected 50 billion-pound Unilever bid for consumer assets

GlaxoSmithKline Plc said it rejected an offer from Unilever for the drugmaker’s consumer healthcare unit last year that valued the business at about $68 billion.

Glaxo in a statement on Saturday said that it had received three unsolicited offers from Unilever for its consumer healthcare business, the final one on December 20 for £41.7 billion in cash and £8.3 billion in Unilever shares.

“GSK rejected all three proposals made on the basis that they fundamentally undervalued the consumer healthcare business and its future prospects,” the statement said.

Unilever confirmed the approach in a statement on Saturday, saying the Glaxo unit would be a “strong strategic fit” as the owner of Ben & Jerry’s ice cream and Dove soap reshapes its portfolio. Unilever is still interested and could return with a fresh bid, though no final decision has been made, people familiar with the bid told Bloomberg. Glaxo’s board still prefers the planned spin-off of a business that includes brands such as Sensodyne toothpaste and Advil painkillers.

A potential takeover would rank among the top deals globally since the beginning of the coronavirus pandemic, and comes at a time when mergers and acquisitions activity is at an all-time high. A deal would speed the transformation of two of the UK’s biggest companies, each of which is facing shareholder pressure to improve performance.

With analysts valuing the Glaxo consumer business at as much as £48 billion, any successful offer from Unilever would likely have to include a significant premium over that level, as well as a consideration of synergies, to tempt Glaxo away from the spin-off plan, which is already at an advanced stage.

Dental business

The dental business is the main draw in Glaxo’s consumer portfolio, offering the biggest growth as almost all other businesses and brands are either losing momentum or growing slowly, the people said. The consumer health unit took on its current shape in 2019 after a deal with Pfizer, which retains a minority stake. Glaxo said that it expects the unit “to deliver annual organic sales growth in the range of 4-6% over the medium term.”

Glaxo Chief Executive Officer Emma Walmsley has been under pressure from shareholders, including activist fund Elliott Investment Management, to be more open to a sale of the consumer division as it seeks to revitalise the core pharmaceutical business. The company hired former Tesco chief executive Dave Lewis in December to lead a spin-off and listing of the consumer goods arm.

Glaxo previously had interest from Advent International, CVC Capital Partners and KKR & Co. for the business, even as it had been preparing for the listing last fall.

Unilever CEO Alan Jope is also under pressure from some investors over the company’s poor performance of late.

Terry Smith, the founder of Fundsmith LLP and one of Unilever’s top 15 shareholders, criticised the group this week in his annual letter to investors. He said the company had “lost the plot” with a focus on publicly displaying sustainability credentials at the expense of focusing on the business.

Sustainability push

Jope has continued the sustainability drive spearheaded by former CEO Paul Polman. Under the two chiefs, Unilever has also reshaped its portfolio, selling slower-growing businesses such as its spreads unit and, more recently, its tea business, while acquiring Glaxo’s consumer operation in India that includes the Horlicks brand.

Nevertheless, the shares have fallen 10% over the past 12 months, which compares with a 20% gain for competitor Nestle SA, where CEO Mark Schneider has taken more aggressive steps to seek new growth and cull underperforming units.

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