Unilever has approached GlaxoSmithKline about a potential acquisition of their consumer health joint venture with Pfizer for as much as £ 50bn. in what could become one of the London market’s biggest deals.
The consumer goods group said on Saturday that it “has approached GSK and Pfizer about a potential acquisition of the company”. The formal offer was unsolicited. GSK declined to comment.
“GSK Consumer Healthcare is a leader in the attractive consumer health field and would be a strong strategic fit as Unilever continues to reshape its portfolio. There can be no assurance that any agreement will be reached,” added Unilever.
The Sunday Times, which first reported the bid, said the Dove soap and Magnum ice cream maker offered around £ 50 billion for the division at the end of last year, but was turned down.
Analysts have estimated the company at around £ 47 billion to £ 48 billion, suggesting the bid did not include a significant premium or savings from synergies between the two consumer companies.
Unilever declined to comment on whether it would return with a higher bid.
GSK has prepared to divest the division, a joint venture with Pfizer, which makes Panadol painkillers, Theraflu cold and flu medicine and Otrivin antifungals. The new division will be led by insider Brian McNamara, and its board of directors will be led by Dave Lewis, the former Tesco CEO.
Activist investors, including US hedge fund Elliott Management, have put pressure on Emma Walmsley, GSK’s CEO, to explore other options – including a sale – if it could generate greater returns for shareholders. Walmsley plans to use the profits from the spin-off to strengthen the deficient pipeline in the pharmaceutical and pharmaceutical industries.
Pfizer owns 32 percent of the division, which GSK has said it will list in London this year, although private equity groups have also looked at a potential acquisition.
A Unilever acquisition would be one of the largest ever on the London market, bringing together the FTSE’s third largest company with a division that, if independent, would be in the top 20. It would only compete with Vodafone’s acquisition of German Mannesmann in 1999 and AB InBev’s acquisition of SABMiller in 2016.
The approach came as Unilever, already one of the world’s largest consumer goods groups, seeks to renew momentum after a period of weak sales growth.
Its share price has plummeted since CEO Alan Jope took over in 2019, and top-10 investor Terry Smith this week attacked the company as “working under the weight of a management obsessed with publicly displaying sustainability information at the expense of of focusing on the basics of the business ”.
Other investors disputed it, but most agree that the company should relate to its underperformance. It agreed last year to sell its tea division, which has been a stumbling block to growth, for 4.5 billion euros to the private equity group CVC, but has not yet made a major acquisition under Jope.
In 2018, Unilever entered into an agreement to buy GSK’s business of health food beverages, including the Horlicks brand, in India and other Asian markets for € 3.3 billion. It has also acquired a number of small consumer health brands, including Smarty Pants, Olly and Onnit supplements and Liquid IV drink blends.