GSK says Unilever’s healthcare bid “undervalues” business potential

17 Jan 2022 --- Unilever’s feverish pursuit of GlaxoSmithKline (GSK) Consumer Healthcare division has been met with multiple rejections for undervaluing the market potential of the businesses.

The company’s ambition to bring GSK into the fold aligns with its unification strategy primarily focused on expanding its presence in health, beauty and hygiene. Consumer health is a complementary category for Unilever that affords higher market growth rates with healthy opportunities to drive growth through investment and innovation. 

However, Unilever’s latest bid of £50 billion (USD68 billion) for GSK’s consumer goods arm has been rejected. It received three offers from Unilever, £41.7 billion (USD57 billion) and £8.3 billion (USD11 billion) in Unilever shares. GSK says these fail to reflect the intrinsic value of the business and its potential.

The Consumer Healthcare business is a joint venture between GSK and Pfizer, with GSK holding a majority controlling interest of 68% and Pfizer 32%.

Courting a consumer goods tease
Unilever is committed to strict financial discipline to ensure that acquisitions create value for shareholders. Consumer Health is a highly complementary category for the company, with strong potential for synergies and several routes to build scale.

The acquisition would create scale and a growth platform for the combined US, China and India portfolio, with further opportunities in other emerging markets. Unilever reports that it could bring much-needed relief from investor pressure for GSK, which has been building over the past year.

The acquisition of GSK’s Consumer Healthcare division could transform Unilever into a formidable beauty and personal care purveyor, competing with Estee Lauder and L’Oréal, for example.The acquisition of GSK’s Consumer Healthcare division would transform Unilever into a formidable beauty and personal care purveyor. 

About 45% of the division is in oral care and Vendor Management Systems (VMS), where Unilever already has a presence. 

GSK, however, feels differently about the value Unilever has placed on its healthcare offering, saying it “fundamentally undervalued” the business and its prospects. Therefore,  it will stick to its plan of spinning off the unit.

The Board of GSK is focused on maximizing value for its shareholders and has assessed the proposals relative to the financial planning assessments to support the proposed demerger of the business in the second quarter of 2022, including the sales growth outlook.

The Consumer Healthcare business has been transformed since 2014 through the integration with Novartis consumer health portfolio in 2015 and the Pfizer portfolio in 2019.

GSK’s Centrum is the best selling multivitamin and mineral brand globally, available in more than 70 markets. Caltrate is its calcium supplement brand through Emergen-C, a pharmacist recommended brand in the US.

The portfolio that can rise to the occasion
Unilever is focused on accelerating growth within the existing business. A series of initiatives have been implemented to enhance operating performance. These include increased focus on operations optimization to improve market competitiveness. 

The company strengthened its portfolio by establishing new businesses in prestige beauty and functional nutrition and the divestment of spreads and tea.

GSK has stated that its consumer goods division can increase sales by up to 6% a year in the medium term. Preliminary figures show sales for GSK’s consumer division reached £9.6 billion (US$ 13.2 billion) in 2021.

In 2020 GSK planned a significant split to become a biopharma company called New GSK with an immune system-focused approach and a separate Consumer Healthcare company. 

Edited by Inga de Jong

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