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Unilever Won’t Sweeten GSK Consumer Offer, Ending Bid for Company – WWD

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LONDON — Unilever said Wednesday it will not increase its offer for GlaxoSmithKline’s Consumer Healthcare arm beyond 50 billion pounds, effectively ending its pursuit of the division.

As reported, Unilever has made three bids for the GSK portfolio, which includes Sensodyne, Polident and Advil. The highest bid, submitted last month, was valued at 50 billion pounds, and was rejected (along with the others) by the GSK board. 

“We note the recently shared financial assumptions from the current owners of GSK Consumer Healthcare, and have determined that it does not change our view on fundamental value. Accordingly, we will not increase our offer above 50 billion pounds,” Unilever said in a brief statement.

“Unilever is committed to maintaining strict financial discipline to ensure that acquisitions create value for our shareholders. Unilever also reiterates its commitment to continuing to improve the performance of its existing portfolio through its ongoing focus on operational excellence, its upcoming reorganization and by rotating the portfolio to higher growth categories.”

The company said it would give an update on its fourth-quarter and full-year performance on Feb. 10.

A chorus of financial analysts had argued the acquisition would destroy value for Unilever shareholders, and that the group had little to gain by buying — and attempting to scale — over the counter drugs, vitamins and supplements.

In a flash report following the statement, James Edwardes Jones of Royal Bank of Canada said: “In effect, this saga has ended. This has been a painful experience for Unilever and its shareholders in our view. We believe that the combination of a relentlessly negative response from commentators and investors together with a substantial decline in the share price has combined to end Unilever’s ambitions in this direction.”

Edwardes Jones said the bank expects the shares to rally on the back of the news, “but in our opinion the Unilever investment case has taken a real severe dent. The board has seemingly decided that the existing business is inadequate, and demonstrated a willingness to countenance what we believe would have been a very unpalatable approach to capital allocation. The fact that Unilever is walking away from GSK consumer health is unequivocally positive in our opinion, but our concern over what happens next has increased.”

He reiterated RBC’s fundamental view that Unilever risks under-delivering as a result of underinvesting.

Unilever’s shares have fallen around 11 percent since last Friday, shortly before the British papers broke the news of its run on GSK. Unilever and GSK both confirmed on Saturday that they were in contact, and GSK said it was not interested in selling the division.

Instead, it plans to pursue previously announced plan to spin off the division via a sale or a public listing.

Unilever’s shares were broadly flat at 34.96 pounds at the close of trading on Wednesday. GSK shares fell 2.1 percent to 16.66 pounds on the London Stock Exchange.

As reported, Unilever had argued that GSK Consumer Healthcare would be a “strong strategic fit,” and noted that 45 percent of GSK Consumer Healthcare is in oral care and VMS (vitamins, minerals, supplements) categories in which Unilever “already has presence and substantial capabilities.”

It said the acquisition of GSK’s consumer arm would also deliver “value and certainty” for the shareholders of GSK and Pfizer.

GSK, and Unilever shareholders, disagreed.

Unilever came under fire from the British press from the moment the deal surfaced: The papers roundly criticized the corporate giant and its chief executive officer Alan Jope, noting the share price was already down 4.5 percent since Jope joined as CEO.

Some business commentators argued that Unilever was panic buying because it had not been as fast as competitors, such as Nestlé, to make acquisitions in high-growth businesses.




LONDON — Unilever said Wednesday it will not increase its offer for GlaxoSmithKline’s Consumer Healthcare arm beyond 50 billion pounds, effectively ending its pursuit of the division.

As reported, Unilever has made three bids for the GSK portfolio, which includes Sensodyne, Polident and Advil. The highest bid, submitted last month, was valued at 50 billion pounds, and was rejected (along with the others) by the GSK board. 

“We note the recently shared financial assumptions from the current owners of GSK Consumer Healthcare, and have determined that it does not change our view on fundamental value. Accordingly, we will not increase our offer above 50 billion pounds,” Unilever said in a brief statement.

“Unilever is committed to maintaining strict financial discipline to ensure that acquisitions create value for our shareholders. Unilever also reiterates its commitment to continuing to improve the performance of its existing portfolio through its ongoing focus on operational excellence, its upcoming reorganization and by rotating the portfolio to higher growth categories.”

The company said it would give an update on its fourth-quarter and full-year performance on Feb. 10.

A chorus of financial analysts had argued the acquisition would destroy value for Unilever shareholders, and that the group had little to gain by buying — and attempting to scale — over the counter drugs, vitamins and supplements.

In a flash report following the statement, James Edwardes Jones of Royal Bank of Canada said: “In effect, this saga has ended. This has been a painful experience for Unilever and its shareholders in our view. We believe that the combination of a relentlessly negative response from commentators and investors together with a substantial decline in the share price has combined to end Unilever’s ambitions in this direction.”

Edwardes Jones said the bank expects the shares to rally on the back of the news, “but in our opinion the Unilever investment case has taken a real severe dent. The board has seemingly decided that the existing business is inadequate, and demonstrated a willingness to countenance what we believe would have been a very unpalatable approach to capital allocation. The fact that Unilever is walking away from GSK consumer health is unequivocally positive in our opinion, but our concern over what happens next has increased.”

He reiterated RBC’s fundamental view that Unilever risks under-delivering as a result of underinvesting.

Unilever’s shares have fallen around 11 percent since last Friday, shortly before the British papers broke the news of its run on GSK. Unilever and GSK both confirmed on Saturday that they were in contact, and GSK said it was not interested in selling the division.

Instead, it plans to pursue previously announced plan to spin off the division via a sale or a public listing.

Unilever’s shares were broadly flat at 34.96 pounds at the close of trading on Wednesday. GSK shares fell 2.1 percent to 16.66 pounds on the London Stock Exchange.

As reported, Unilever had argued that GSK Consumer Healthcare would be a “strong strategic fit,” and noted that 45 percent of GSK Consumer Healthcare is in oral care and VMS (vitamins, minerals, supplements) categories in which Unilever “already has presence and substantial capabilities.”

It said the acquisition of GSK’s consumer arm would also deliver “value and certainty” for the shareholders of GSK and Pfizer.

GSK, and Unilever shareholders, disagreed.

Unilever came under fire from the British press from the moment the deal surfaced: The papers roundly criticized the corporate giant and its chief executive officer Alan Jope, noting the share price was already down 4.5 percent since Jope joined as CEO.

Some business commentators argued that Unilever was panic buying because it had not been as fast as competitors, such as Nestlé, to make acquisitions in high-growth businesses.

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