Unilever Continues to Pursue GSK Consumer Healthcare, Despite Three Failed Bids
LONDON — After facing a slew of criticism over its three failed bids for the consumer health care division of GSK, Unilever has reiterated its interest in the British owner of Advil and Sensodyne — and its own strategy to focus on the high-growth categories of health, beauty and hygiene.
Unilever, parent of brands ranging from Dove to Domestos cleaning bleach, confirmed over the weekend that it wants to buy GlaxoSmithKline’s consumer health care division, and is determined to do so despite GSK’s rejection of its latest bid, valued at 50 billion pounds.
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Early Monday morning, before the stock market opened, Unilever sent out a statement saying that management was “committed to accelerating the company’s growth and repositioning the portfolio into higher growth categories.”
It said that, as a result of its reported interest in GSK Consumer Healthcare, it wanted to bring forward a planned update, and set out its strategic direction.
That strategy includes expanding Unilever’s presence “materially” in the health, beauty and hygiene categories, which have “higher rates of sustainable market growth, and significant opportunities to drive growth through investment and innovation.”
Unilever said it would leverage its “strong presence” in emerging markets to fuel that growth.
The company also said that any major acquisitions would come with “accelerated divestment” of lower growth brands and businesses. Unilever didn’t spell out what those businesses were, but it means food. The company recently agreed to sell its tea business, having also sold its margarine and spreads division a few years ago.
“Unilever is committed to strict financial discipline to ensure that acquisitions create value for shareholders,” the company said.
“The company benefits from a strong balance sheet and cash generation and remains committed to maintaining an A-band credit rating. Following any acquisition, the company would target a return to current levels of gearing over the short to medium term,” Unilever said.
It argued that GSK’s consumer division would be a “strong strategic fit,” and noted that 45 percent of that business is in oral care and VMS (vitamins, minerals, supplements), categories in which Unilever said it “already has presence and substantial capabilities.”
Unilever added that the acquisition of GSK’s consumer arm would also deliver “value and certainty” for the shareholders of GSK and Pfizer.
Later this month, Unilever said it will announce a “major initiative” to enhance its performance, with plans to move to an operating model aimed at driving “greater agility, improved category focus and strengthened accountability.”
The company also plans to update on its performance for the fourth quarter and the full year, on Feb. 10.
In a research note published shortly after Unilever’s statement on Monday morning, RBC said it disagrees with Unilever’s claim that GSK’s business would be a strong strategic fit.
The bank believes there is little overlap between the two corporates’ vitamin, minerals and supplements businesses, and argues that Unilever would have a hard time taking GSK’s over-the-counter medicines to markets such as India, China and the U.S.
“Clinical and medical characteristics of the GSK Consumer Health portfolio mean regulation is much more restrictive than for the rest of Unilever’s business,” wrote RBC. “This makes it much harder to bring brands into new markets.”
RBC added that its overall view on Unilever is that it risks “under-delivering as a result of underinvesting.”
Over the weekend, following Unilever’s confirmation of its interest in GSK Consumer Healthcare, the British press criticized the corporate giant and its chief executive officer Alan Jope, noting the share price is down 4.5 percent since Jope joined and arguing that Unilever has not been as fast as competitors, such as Nestlé, to make acquisitions in high-growth businesses.
Shares in Unilever opened down 6.5 percent at 36.80 pounds on Monday.
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