Unilever said it had approached GlaxoSmithKline about buying the pharmaceutical company’s consumer goods division after a newspaper claimed that it had been turned down for a 50 billion pound ($68.4 billion) proposal.
In a statement released on Saturday, Unilever, which has been criticized by certain investors for its falling stock price, confirmed the approach about a possible takeover of the company.
“GSK Consumer Healthcare is a market leader in the appealing consumer health category and would represent a solid strategic match as Unilever continues to re-shape its portfolio,” the company stated.
“There is no way to know whether or not an agreement will be reached.”
GSK did not respond to a request for comment on the strategy. In the middle of this year, the consumer goods division of the company will be split off into its own stock.
GSK and Pfizer, which holds a minority investment in the division, had rejected Unilever’s bid for the business late last year as being too low, according to the Sunday Times in the United Kingdom.
Unilever’s approach for Glaxo’s portfolio of household goods, including Panadol medicines and Sensodyne toothpaste, is said to have been unsolicited, according to the source. Unilever controls names such as Dove soap and Marmite.
According to the newspaper, the deal did not contain a takeover premium or acknowledgment of synergies, and it was unclear whether the group would make a bigger offer.
Unilever declined to comment on whether it will make a greater offer in the future. Last year, brokerage Jefferies valued the entire consumer segment at 45 billion pounds.
The offer comes as Unilever’s Chief Executive Alan Jope faces mounting pressure to turn around the company’s dwindling stock price as it battles to compete in the face of rising inflationary costs, particularly in emerging nations, where it generates the majority of its income.
Despite a pandemic-driven increase in grocery and household products purchasing that has helped all three companies, the FTSE-listed conglomerate’s stock has declined 10% over the past year, compared to P&G’s 18% growth and Reckitt’s 1.4 percent decline.
Terry Smith, a British fund manager whose Fundsmith vehicle is a top-10 Unilever investment, chastised the company this week for emphasizing sustainable credentials over performance.
Smith could not be reached for comment right away.
PRESSURE FROM INVESTORS
At GSK, investor activism has also surfaced.
After falling behind in the COVID-19 vaccination competition, activist hedge fund Elliott Management unveiled a multi-billion pound investment in GSK in April last year, putting pressure on CEO Emma Walmsley to consider a shake-up.
The consumer remedies market, which has traditionally been linked to the prescription drug industry, is also undergoing huge changes as numerous pharmaceutical corporations no longer see the value in combining products.
In November, Johnson & Johnson announced intentions to spin off its consumer health division, which owns the Listerine and Baby Powder brands, to concentrate on medicines and medical equipment. Sanofi said that its consumer division would become a “standalone” company.
The transaction would be Jope’s greatest move since becoming CEO of Unilever in 2019.
He earlier dismissed reports that Unilever was looking for large acquisitions, saying that the business would instead focus on smaller investments in fast-growing categories including premium beauty, plant-based foods, and health and wellness.
If a transaction with GSK is completed, it will be Unilever’s second with the corporation, having purchased its health food drinks business in India and other Asian markets, including Horlicks, for 3.3 billion euros in 2018.
