GlaxoSmithKline Plc rejected the offer of $68 billion from Unilever Plc for its consumer healthcare business in 2021 as per information provided by the company.
As per Bloomberg news, Glaxo said in a statement Saturday that it had received three offers from Unilever, the final one on December 20 for 8.3 billion pounds in Unilever shares and 41.7 billion pounds in cash. It rejected all the proposals because the healthcare unit was undervalued fundamentally and on its future earnings.
Unilever confirmed the development and said that the GSK unit would have been a solid strategic addition to its portfolio, which includes Dove Soap and Ben & Jerry’s ice cream. It is still interested in the transaction and will come back with a fresh bid. According to informed sources, no decision has been taken as yet.
GlaxoSmithKline board prefers to spin off the consumer business unit that produces Advil painkillers and Sensodyne toothpaste brands.
The Unilever takeover of the GSK unit will be one of the biggest deals since the pandemic and comes at a time when there is an all-time high of Mergers and acquisition deals globally. If the transaction takes place, it will transform U.K.’s two most prominent brands as they currently face pressure from shareholders to improve performance.
The consumer business of Glaxo is valued at around 48 billion pounds by analysts. This means that any offer from Unilever will have to be at a significant premium above that valuation and a tempting synergy plan that would influence Glaxo to agree to the spin-off.
Glaxo’s dental business is the main attraction of its consumer portfolio. It offers the biggest growth when other brands and businesses are losing momentum and have stagnant growth. GSK consumer division includes Pfizer as a minority shareholder after a deal in 2019. It expects this unit to grow at 4% to 6% over the medium term.
CEO Emma Walmsley of GSK is under pressure from the shareholders, including activist fund Elliot Investment Management to explore the sale of its consumer unit and revitalize its core Pharma business.
GSK has hired Dave Lewis, the former CEO of Tesco Plc, to head the spin-off. Earlier, CVC Capital, KKR & Co., and Advent International had shown interest in the business. CEO Alan Jope of Unilever is also under pressure to perform after the company’s recent poor performance.
Fundsmith LLP founder, Terry Smith, one of Unilever’s top shareholders, criticized the group saying that the company that owns brands such as Domestos cleaners and Hellmann’s mayonnaise have lost the plot as they were more interested in showing sustainability credibility publicly rather than focusing on the business.
Despite Unilever reshaping its business under Jope and ex CEO Paul Polman, the shares have fallen 10% in the past 12 months, whereas rivals Nestle SA has gained 20%.
Centerview Partners LLC and Deutsche Bank AG are advisors to Unilever. In contrast, Glaxo works with Citigroup and Goldman Sachs on the listing and activist defense issue.
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