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Unilever rules out upping £50bn bid for GSK unit

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·Business Reporter, Yahoo Finance UK
·3 min read
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Smartphone with displayed Unilever logo is pictured next to GSK logo in this illustration taken on January 17, 2022. REUTERS/Dado Ruvic/Illustration
Unilever and GSK: A GSK spokesman said: “The consumer healthcare business has an exceptional portfolio and offers existing and prospective shareholders a highly attractive financial profile.” Photo: REUTERS/Dado Ruvic/Illustration

Unilever (ULVR.L) has put its foot down on its £50bn ($68bn) for GlaxoSmithKline’s (GSK.L) consumer healthcare business after investor backlash.

The consumer goods company had already made three separate bids to acquire the business, but GSK said earlier this week that the latest offer was still “fundamentally undervalued”.

The pharmaceutical firm said its board unanimously concluded the offer was not in the best interests of shareholders, and that it was instead pushing ahead with the planned demerger of the unit.

It later released improved data on recent performance to entice a higher offer of around £60bn.

Unilever, which owns brands such as Dove, Vaseline, Cif and Lipton, initially suggested it would continue the takeover attempt as it believes GSK would be a “strong strategic fit” with its business. However, investors publicly spoke out against the deal.

“There are a lot of ways for Unilever to enhance its position and this acquisition is not one of them,” Bert Flossbach, founder and chief investment officer at German asset manager Flossbach von Storch, said. He is a top 10 shareholder in the company.

Read more: Unilever shares hit as GSK says £50bn bid is 'fundamentally undervalued'

GSK’s consumer arm owns brands including Panadol and Advil painkillers, Sensodyne toothpaste, Tums digestive health products, and Nicorette nicotine replacement therapy.

A GSK spokesman said: “The consumer healthcare business has an exceptional portfolio and offers existing and prospective shareholders a highly attractive financial profile.”

But after markets closed in London on Wednesday, Unilever said: “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 £50bn.”

Unilever is looking to refocus on its health, beauty and hygiene brands, selling off those with slower growth, meaning that the group may offload some of its food operations in the near future, including its Ben & Jerry's and Magnum ice cream brands.

However, analysts at Barclays (BARC.L) and Bernstein both downgraded their ratings on the stock this week, with the latter saying the deal was "very bad" for shareholders.

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Commenting on the £50bn bid, Russ Mould, investment director at AJ Bell, said: “GlaxoSmithKline’s share price jumped on the news as Unilever’s actions effectively fired the starting gun for a bid war for the consumer goods unit. Nestle (NESN.SW) could be interested, so too private equity.

“Unilever looks to be bidding for the unit because it needs to inject some excitement into its business, having recently disappointed with sales and profit margins.

“This really is a Marmite situation for GlaxoSmithKline’s shareholders – they’re either hoping for a quick return now through a sale or better returns in the future through the planned demerger.”

Watch: Unilever to raise prices for its brands by 4%