GSK rejects three Unilever bids to buy consumer healthcare arm, says unit was "fundamentally undervalued"

January 16, 2022

United Kingdom-based pharmaceutical giant (GSK) confirmed January 15 it had rejected three "unsolicited, conditional and non-binding proposals" by  to acquire its Consumer Healthcare division, including one bid of 50 billion in value made on December 20, believing Unilever "fundamentally undervalued" the business and its potential.

News that Unilever attempted to buy GSK Consumer Healthcare for 50 billion pounds, split between GBP41.7 billion in cash and 8.3 billion in Unilever shares, was first reported by , and subsequently confirmed by both companies. Had the latest acquisition offer gone through, it would have been the largest deal since the beginning of the Covid-19 pandemic, and one of the biggest ever among companies listed on the.

A deal would likely mean integrating the GSK division into Unilever's own beauty and personal care business, which has seen profit margins struggle under Covid-19 lockdowns and higher costs for plastics and petrochemicals.

A brief response on the Unilever website confirmed it "had approached GSK and Pfizer about a potential acquisition", and adds GSK Consumer Healthcare "would be a strong strategic fit" as the company looks to rework its portfolio. GSK indicated the proposals were "carefully evaluated" by its, but unanimously rejected under the conclusion they "were not in the best interests of GSK shareholders" and "failed to reflect the intrinsic value of the business and its potential".

The Sunday Times have indicated the latest deal did not include an acquisition premium or recognition of ; the joint venture between GSK and healthcare firm, which holds a minority stake in the company, was initially projected to generate GBP500 million in cost savings by this year and realise "substantial cost synergies". The BBC's business editor wrote that a standard takeover premium would be about 30%, but could be reduced over the GBP10 billion in debt GSK was predicted to "leave on the books", of the GBP22 billion net debt GSK reported for Q3 2021.



The deals were assessed by the Board respective of a proposed demerger of GSK Consumer Health into a separate in the middle of this year. Jack wrote GSK "always" had "an open mind to a trade sale to another party if the price was right." Unilever did not take into account the standard takeover premium, the value of cost savings and Board confidence Consumer Health could deliver "superior organic sales growth" of between four and six per cent in the medium term. This was despite valuations of about GBP50 billion by and  analysts, and a lower GBP45 billion valuation by.

There are no current talks between Unilever and either Pfizer or GSK, and the Unilever statement reads: "There can be no certainty that any agreement will be reached." Under CEO, Unilever has focused its investments and marketing on brands which "communicate a strong environmental or social purpose" by streamlining its holdings in items like beauty products and tea. Jope previously said Unilever would concentrate on smaller takeovers in industries like luxury beauty and wellness.

However, Russ Mould, investment director at, told the BBC this would be a "high risk deal" at a time investors are cautious about GSK's performance, but also a time of rising inflation he says encourages "consumer goods with loyal customers". Mould added despite strong cashflow, Unilever had recently missed targets on sales and profit margins, putting pressure on the CEO.

Pressure by s and Bluebell Capital Partners have also mounted against GSK CEO  over the unit's failure to develop a  and Walmsley's own lack of scientific experience. GSK has been involved in the ongoing development of a with French biopharmaceutical company, and announced preliminary results from Phase 3 trials last month.

In 2018, Unilever bought several consumer nutritional products from GSK, including its flagship product, and merged its Indian subsidiary, , with GSK Consumer Healthcare India.