Analysts, Markets Think Unilever’s GSK Consumer Bid Is a Bad Idea

LONDON — Bad idea.

Analysts covering Unilever didn’t hold back their feelings about the group’s 50-billion-pound bid for the consumer health care division of GlaxoSmithKline, which emerged over the weekend, and sent Unilever’s price plummeting on Monday.

More from WWD

On Saturday Unilever confirmed its interest in purchasing the division, a joint venture between GSK and Pfizer which owns brands including Sensodyne toothpaste, Centrum multivitamins and Advil painkillers, arguing there would be synergies galore and room to scale the brands in China, India and the U.S., where Unilever already has a strong presence.

GSK responded quickly, saying it has no interest in Unilever’s bids, and will pursue its plans to spin off the consumer health care division via a sale or a public listing. The British pharma giant has already installed Sir Dave Lewis, the former Unilever executive who later turned the ailing Tesco around, as executive chair designate of the new post-spin-off entity.

As reported on Saturday, GSK confirmed that it has received three unsolicited, conditional and nonbinding proposals from Unilever plc, the latest of which was valued at 50 billion pounds. It has rejected them all.

GSK said it believes all three bids “fundamentally undervalue the Consumer Healthcare business and its future prospects.”

Unilever isn’t giving up, and on Monday the company reiterated its strategy of focusing on its health, beauty and hygiene categories, which have “higher rates of sustainable market growth, and significant opportunities to drive growth through investment and innovation,” according to the company.

It argued that GSK Consumer Healthcare would be a “strong strategic fit,” and noted that 45 percent of GSK Consumer Healthcare is in oral care and VMS (vitamins, minerals, supplements), categories in which Unilever “already has presence and substantial capabilities.”

Story continues

The company said the acquisition of GSK’s consumer arm would also deliver “value and certainty” for the shareholders of GSK and Pfizer.

Jude Edginton

The markets were not convinced: shares of Unilever closed down nearly 7 percent on Monday at 36.62 pounds. GSK shares surged more than 4 percent to close at 17.09 pounds on the London Stock Exchange.

Analysts made their feelings about a future deal very clear.

Bernstein said the potential deal “doesn’t make sense,” and predicted 10 billion pounds of “value destruction” for Unilever shareholders, assuming that the British giant ends up overpaying for the GSK division.

Bernstein also downgraded Unilever’s shares to “underperform,” with a target price of 35 pounds.

“We think this is a very bad deal for Unilever shareholders,” wrote Bruno Monteyne, Bernstein’s senior analyst for European food, European household and personal care.

He noted that Unilever would not be a better owner of GSK’s assets as those assets were already “low growth” pre-COVID-19,…