Unilever PLC (LSE:ULVR) has confirmed that it had a bid for GlaxoSmithKline’s consumer healthcare business rebuffed.
GlaxoSmithKline PLC (LSE:GSK) (GSK) revealed yesterday that it knocked back three approaches late last year from Unilever for its up for sale consumer healthcare business, with the last bid pitched at £41.7bn plus £8.3bn in shares.
In a stock market announcement this morning, Unilever said its pursuit of the blockbuster deal heralds a change of direction for the Anglo-Dutch consumer goods giant.
Following an extensive strategic review, the plan is to reposition Unilever's portfolio into higher growth categories, with a particular emphasis on Health, Beauty and Hygiene.
“GSK Consumer Healthcare is a leader in the attractive consumer health space and would be a strong strategic fit as Unilever continues to reshape its portfolio,” Unilever said in a statement on Sunday.
Unilever noted that 45% of GSK Consumer Healthcare is in oral care and vitamins, minerals and supplements (VMS); these are categories in which Unilever already has presence and substantial capabilities, Unilever added.
Over the counter (OTC) products would be an attractive “adjacent category”, with the ability to combine Unilever's consumer and branding expertise with GSK Consumer Health's technical OTC capabilities. The acquisition would create scale and a growth platform for the combined portfolio in the US, China, and India, with further opportunities in other emerging markets, Unilever said, suggesting to most observers that it has not yet given up on acquiring GSK’s Consumer Healthcare Business.
On Monday, the company, which counts Marmite, Dove and Ben & Jerry’s among its brands, signalled its intent to make major acquisitions in the health, beauty and hygiene sectors while offloading businesses and brands that are “intrinsically lower growth”.
To allay concerns that it might be biting off more than it can chew, Unilever said that following any acquisition, the company would target a return to current levels of gearing over the short to medium term.
As well as addressing its long-term strategic direction, the Unilever board revealed it has been focused on accelerating growth within the existing business. A series of initiatives have been implemented to enhance operating performance. These include increased focus on operational excellence to improve market competitiveness, and aligning resources to five clear strategic choices.
Later this month it will announce a major initiative to enhance the group’s performance that will entail moving away from its existing structure to an operating model that it says will drive greater agility, improve category focus, and strengthen accountability.
The board of Unilever is under pressure to improve performance after the City backed it in repelling the unwelcome interests of Kraft Heinz, the US company that controversially gobbled up confectionery company, Cadbury.
Since hitting a nadir of 5,191 on 14 March 2020 as the market was rattled by the Covid-19 pandemic, the FTSE 100 has recovered to 7,543 – a gain of 45%. Over the same period, the share price of Unilever has fallen 5%, so the pressure is on.
GSK, meanwhile, intends to stick to the plan, agreed with its Consumer Healthcare partner Pfizer Inc (NYSE:PFE), to demerge the business and float the company as an independent unit.
It releases results on 9 February, the day before Unilever releases its full-year results.