GlaxoSmithKline has turned down Unilever’s £ 50bn offer to acquire a joint venture for consumer health with Pfizer, which could become one of the biggest deals in the London market.
Unilever has repeatedly tried to work with GSK over the past few months, making a number of approaches over the period, according to people with direct knowledge of the issue. The latest offer of about £ 50bn including debt has been turned down, people said.
GSK, which is working with Goldman Sachs, declined to comment.
Unilever said on Saturday that it had “contacted GSK and Pfizer regarding a potential business acquisition”.
“GSK Consumer Healthcare is a leader in an attractive consumer health space and would be a strong strategic fit as Unilever continues to reshape its portfolio. “There can be no assurance that any agreement will be reached,” Unilever added.
The offer was first reported by the Sunday Times.
The prospects for reaching an agreement depend on what the market and GSK believe is the value of consumer business. Analyst estimates range from £ 37 billion to £ 48 billion for the unit, which had £ 2.45 billion in net profit for the whole of 2021, according to one person familiar with the matter.
Unilever declined to comment on whether to return with a higher bid.
GSK is preparing to launch a division, a joint venture with Pfizer that produces painkillers Panadol, cold and flu drug Theraflu and decongestant Otrivin. The new company would be run by GSK insider Brian McNamara and its board should be chaired Dave Lewis, former CEO of Tesco.
Activist investors including the American hedge fund Elliott Management have exert pressure to Emma Walmsley, CEO of GSK, to explore other options – including a sale – if it can bring in a higher return for shareholders. Walmsley plans to use spin-off revenues to bolster the blurred pipe of the pharmaceutical and pharmaceutical business.
Pfizer owns 32 percent of the division, which GSK said it would include in London this year, although private equity groups have also considered a potential purchase.
The acquisition of Unilever would be one of the largest ever in the London market, bringing together FTSE’s third-largest company with a division that, if independent, would be among the top 20. Only Vodafone’s acquisition of German Mannesmann in 1999 and AB InBev’s purchase of SABMiller in 2016 would compete with it.
The approach came as Unilever, already one of the world’s largest consumer goods groups, seeks to regain momentum after a period of slight sales growth.
His share price has fallen since CEO Alan Jope took power in 2019, and Terry Smith’s 10 biggest investors this week attacked the company as “work under the burden of management who is obsessed with publicly showing sustainability credentials at the expense of focusing on business fundamentals”.
Other investors have disputed this, but most agree that the company needs to address its poor performance. It agreed last year sold its tea division, which slowed growth, for 4.5 billion euros to private investment group CVC, but a major acquisition has yet to be made under Jope.
In 2018, Unilever signed a contract to buy GSK’s health food beverage business, including the Horlicks brand, in India and other Asian markets for 3.3 billion euros. It has also acquired a number of small brands for consumer health, including Smarty Pants, Olly and Onnit supplements, and Liquid IV beverage blends.