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GlaxoSmithKline shares rise after it rejects Unilever bid for its consumer healthcare division

Published: 08:44 17 Jan 2022 GMT

GlaxoSmithKline PLC - GlaxoSmithKline shares rise after it rejects Unilever bid for its consumer healthcare division
GSK CEO Emma Walmsley is sticking to her guns and preparing to demerge the consumer healthcare business

GlaxoSmithKline PLC (LSE:GSK) said the £50bn offer by Unilever PLC (LSE:ULVR) for its Consumer Healthcare business fundamentally undervalues the business.

Unilever made three unsolicited approaches to acquire the business – in which GlaxoSmithKline (GSK) has a 68% stake (the rest is owned by US drugs giant Pfizer Inc (NYSE:PFE)) – and all were rejected by GSK. The third but probably not final bid from Unilever valued the business at £50bn.

The FTSE 100 drugs giant, which inherited many of its consumer healthcare lines when Glaxo Wellcome merged with SmithKline Beecham, said on Monday that the Consumer Healthcare business has been transformed since 2014 through the successful integrations of GSK's business with the Novartis consumer health portfolio in 2015 and the Pfizer portfolio in 2019.

GSK asserted that this transformation provided a platform to scale-up and optimise many aspects of the Consumer Healthcare business including divesting lower growth brands, introducing a new research & development/innovation model, optimising the supply chain and manufacturing network, alongside continued investment in new digital, data and analytic platforms and capabilities.

“This has resulted in the creation of a leading global consumer healthcare business with annual sales of £9.6 billion in 2021.” GSK noted in a statement on Monday.

The board of GSK said it is confident that the Consumer Healthcare business can sustainably deliver annual organic sales growth in the range of 4-6% on a constant exchange rates (CER) basis over the medium term.

Investment analysts are currently forecasting growth of 3-3.5%.

Barclays updated its sum of the parts (SOTP) valuation for GSK Consumer Healthcare to a number “roughly in-line with Unilever's most recent bid”; buyers normally have to pay an acquisition premium to persuade an unwilling owner to sell a business.

“GSK is thought to be holding out for £60bn,” according to Mark Kimsey, an equity trader at Frederick & Oliver.

Meanwhile, GSK remains committed to demerging the business, which owns the Panadol and Nicorette brands, and listing it on the London Stock Exchange.

Shares in Unilever were down 5.8% at 3,708p in the first half-hour of trading while GSK’s share price rose 5.3% to 1,727.4p.
 

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