Glaxo rejects Unilever’s $68 billion offer for consumer business

Bloomberg — GlaxoSmithKline Plc (GBX) last year rejected an offer from Unilever Plc (ULVR) for the drugmaker’s consumer healthcare unit. which values ​​the business at around 50 billion pounds ($68 billion), according to people familiar with the matter.

Unilever confirmed the rapprochement in a statement on Saturday, saying the Glaxo unit would be a “strong strategic fit.” while owners of Ben & Jerry’s ice cream and Dove soap restructured its portfolio.

Unilever remains interested and could return with a new offer, although a final decision has yet to be made, the people said. Glaxo’s board of directors is open to all proposals, but the offer is not in the range that will be consideredthey said, adding that spin-off businesses that include brands like Sensodyne toothpaste and Advil painkillers remain options.

The potential acquisition will rank among the top deals globally since the start of the coronavirus pandemic, and it comes at a time when merger and acquisition activity is at an all-time high. The deal will accelerate the transformation of two of Britain’s largest companies, each facing pressure from shareholders to improve their results.

Analysts value Glaxo’s consumer business at £48 billion, so any Unilever offering must include a significant premium above that level., as well as synergies considerations, to tempt Glaxo to abandon spinoff plans that were already in advanced stages.

dental business

The dental business is the main draw of Glaxo’s consumer product portfolio, offering the biggest growth as nearly all other businesses and brands lose momentum or grow slowly, the people said. The consumer healthcare unit took its current form in 2019 following a deal with Pfizer Inc, which retains a minority stake.

Glaxo CEO Emma Walmsley has been under pressure from shareholders, including activist fund Elliott Investment Management, to be more open to sales of the consumer division as it seeks to revitalize its core pharmaceutical business. The company hired Dave Lewis, former CEO of Tesco Plc, in December to lead the spin-off and listing of its consumer goods arm.

Glaxo has received interest from Advent International, CVC Capital Partners and KKR & Co. (KKR) is in business while preparing to go public last fall.

Unilever CEO Alan Jope has also come under pressure from some investors over the company’s recent poor results.

Terry Smith, founder of Fundsmith LLP and one of Unilever’s top 15 shareholders, criticized the group this week in his annual letter to investors. He stated that the company, whose brands also include Hellmann mayonnaise and Domestos cleaning products, it has “lost its way” by focusing on publicly displaying sustainability credentials to the detriment of business.

Drive for sustainability

Jope continues the sustainability efforts pioneered by its previous CEO, Paul Polman. Under the two bosses, Unilever has also reshuffled its portfolio, selling off lower-growth businesses such as its ointment unit and, more recently, its tea business, while acquiring Glaxo’s consumer operations in India which include the Horlicks brand.

However, its stock has fallen 10% in the past 12 months, which contrasts with the 20% gain of rival Nestlé SA (NESN), whose CEO, Mark Schneider, has taken more aggressive steps to seek new growth and phase out units. underperforming units. .

A little over a year ago Unilever completed its rationalization of becoming a single entity based in the UK, abandoning its longstanding dual citizenship and reversing previous plans to consolidate in the Netherlands.. One reason to abandon complex structures is to ease the prospect of mergers and acquisitions.

Deutsche Bank AG (DBK) and Centerview Partners LLC are advising Unilever, according to people familiar with the situation. Glaxo works with Goldman Sachs Group Inc. (GS) y Citigroup Inc. (C) in the IPO and the defense of the activists, as reported by Bloomberg News in the month of June.

The Times first reported on Unilever’s offer on Saturday.

–With the help of Thomas Buckley and Thasos Vossos.

Matt Thompson

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