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Unilever eyeing GSK’s consumer goods arm in potential £50bn deal

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Consumer goods giant Unilever said it had approached Glaxosmithkline to buy the pharmaceuticals group’s consumer goods arm, after a newspaper reported a 50 billion pound ($68.4 billion) bid it had made had been postponed.

Unilever, which has come under fire from some investors for its underperforming share price, confirmed the approach of a potential acquisition of the company in a statement on Saturday.

“GSK Consumer Healthcare is a leader in the attractive consumer healthcare space and would be a strong strategic fit as Unilever continues to reshape its portfolio,” he said.

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“There can be no certainty that an agreement will be reached.”

GSK declined to comment on the approach. The group’s consumer goods business is expected to be listed separately in the middle of this year.

Earlier Britain’s Sunday Times said Unilever’s bid for the company made late last year was worth around £50bn and had been rejected as too low by GSK and Pfizer, which owns a minority stake in the division.

The approach by Unilever, which owns brands such as Dove and Marmite soap, to Glaxo’s portfolio of household brands, including Panadol painkillers and Sensodyne toothpaste, was reportedly unsolicited, the report adds.

The offer did not include any acquisition premium or recognition of synergies, the newspaper said, adding that it was unclear whether the group would make a superior offer.

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Unilever declined to say whether it would return with a higher offer. Last year brokerage firm Jefferies valued the entire consumer unit at £45 billion.

The offer comes at a time when Unilever Chief Executive Alan Jope is under pressure to boost its languid share price as it struggles to compete against high inflationary costs, particularly in emerging markets. , his main source of income.

Shares of the FTSE-listed conglomerate have fallen 10% over the past year compared to P&G’s 18% rise and Reckitt’s 1.4% fall, despite an increase in grocery purchases and of household items due to the pandemic which benefited all three companies.

UK fund manager Terry Smith, whose vehicle Fundsmith is one of Unilever’s top 10 investors, this week criticized the group for promoting sustainability credentials at the expense of performance.

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Smith was not immediately available for comment.

INVESTOR PRESSURE

Investor activism has also surfaced at GSK.

In April last year, US activist hedge fund Elliott Management disclosed a multi-billion pound stake in GSK, pressuring CEO Emma Walmsley to explore a company overhaul after falling behind in the race for the COVID-19 vaccine.

The consumer remedies industry, traditionally attached to the prescription drug sector, is also in a phase of major transformation, as many pharmaceutical companies no longer see benefit in a combination.

Johnson & Johnson announced plans in November to spin off its consumer health care division, which owns the Listerine and Baby Powder brands, to focus on pharmaceuticals and medical devices. Sanofi said its consumer unit would become a “standalone” business.

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For Unilever, the deal would be Jope’s biggest move since becoming CEO in 2019.

He previously dismissed suggestions that Unilever was in the big deal market, saying instead the company would focus on smaller acquisitions in fast-growing areas such as luxury beauty, plant-based foods and health and well-being.

If an agreement with GSK is reached, it will be Unilever’s second with the company after buying its health drinks business, including Horlicks, in India and other Asian markets for 3.3 billion euros in 2018.

($1 = 0.7314 pounds)

(Writing by William Schomberg; Editing by Mark Heinrich and Jan Harvey)

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