Soapmaker Dove, Unilever Reports Suing of GSK’s Consumer Arm; stocks fall

  • Unilever shares fall more than 8%, GSK wins
  • Unilever signals it will pursue deal for GSK unit
  • Says it is committed to “strict financial discipline”

Jan 17 (Reuters) – Unilever (ULVR.L) said on Monday it would pursue a deal for the consumer healthcare arm of GSK (GSK.L), calling it a “strong strategic fit”, but its actions fell more than 8%, underscoring investor doubts over its 50 billion pound ($68.4 billion) bid.

GlaxoSmithKline confirmed over the weekend that it had rejected three bids from soap maker Dove and Lifebuoy for the company, which is home to brands such as Sensodyne toothpaste, Emergen-C vitamin supplement and Panadol painkiller. .

GSK, led by Emma Walmsley, has hired Goldman Sachs (GS.N) and Citigroup (CN) to review Unilever’s approach, but it will not enter into talks unless Unilever raises its offer, have indicated sources familiar with the matter.

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GSK shares jumped 6% to their highest level since May 2020. He said on Saturday that Unilever’s proposal “fundamentally undervalued” the consumer sector, adding that he would stick to its division enrollment plan this year. Read more

“Investor initial reactions to the deal over the weekend were almost uniformly negative,” Jefferies analysts said in a note. Others noted that Unilever’s falling share price indicated a lack of confidence in its management and concern over the price.

Spreads maker Marmite, however, defended the bid on GSK’s consumer business, in which US pharmaceutical company Pfizer (PFE.N) has a 32% stake.

“The acquisition would create scale and a platform for growth for the combined portfolio in the United States, China and India, with new opportunities in other emerging markets,” Unilever said, highlighting synergies in the oral care and vitamin supplement industry.

GSK and Pfizer would open talks with Unilever boss Alan Jope if the consumer goods giant was willing to raise its offer to more than 60 billion pounds, a source familiar with Pfizer’s strategy has said.

The source called the company a “legitimate standalone candidate”, adding that its market value could reach nearly $100 billion once the company is established and listed on the stock exchange.

“Right now there is more value in a spin-off but if Unilever is willing to go beyond £60bn then a dialogue could start,” he said.

GSK declined to comment, and Pfizer did not immediately respond to a request for comment on the fate of GSK’s consumer business.

EXECUTION

GSK presented plans for a separate listing from the consumer arm in June last year, following pressure from investors to explore a company overhaul and focus on its pharmaceuticals business.

A takeover by Unilever of the consumer division would be one of the largest ever in the London market and one of the biggest deals in the world since the start of the COVID-19 pandemic.

It would also boost Unilever’s growth strategy as management has been under pressure to turn around the company’s sluggish stock price and deal with high costs and thin margins.

However, some analysts have expressed doubts about Unilever’s ability to sweeten its offer to GSK.

“Given the heightened investor concern lately and the reaction to Unilever’s share price this morning, this could prevent a higher bid from materializing,” said Chris Beckett, head of research at Unilever. the shares at Quilter Cheviot.

Reports of buying interest in GSK’s consumer arm, including from private equity players, have been circulating for some time. Read more

“It’s a bit of a surprise that (GSK and Pfizer) haven’t ripped off Unilever’s £50bn arm because it’s a decent price, the only question being whether it’s the right one” , CMC Markets analyst Michael Hewson said in a statement. Remark.

“It could be for GlaxoSmithKline and Pfizer, but there is a feeling that for Unilever it may well prove to be too high a price,” Hewson added.

Unilever, which is due to announce a move later this month to bolster its business, said on Monday it was committed to “strict financial discipline” on any acquisition, adding that such deals would be accompanied by the divestment of ‘low-margin companies or brands.

($1 = 0.7312 pounds)

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Reporting by Pushkala Aripaka and Siddharth Cavale in Bengaluru, Keith Weir, Pamela Barbaglia, Carolyn Cohn and Simon Jessop in London and Ludwig Burger in Frankfurt; Editing by Shounak Dasgupta, Emelia Sithole-Matarise and Jane Merriman

Our standards: The Thomson Reuters Trust Principles.

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