Unilever will offer weight gain for Glaxo consumer unit

Glaxo has declined the latest three offers for a bundle of brands including Advil pain relievers and Sensodyne toothpastes — with some financial firms discussing substantial lending for a bid of more than £50 billion ($68 billion).

Unilever A final decision has not been taken on whether to use the firepower, said the people, who requested anonymity because they are not allowed to speak publicly. The owners of Ben & Jerry’s Ice Cream and Dove Soap may eventually sell some non-core assets from the Glaxo portfolio to buyers, including private equity firms, that could help with acquisitions, the people said.

Over the weekend Glaxo said it had greatly reduced Unilever’s offerings after the UK consumer-products company reaffirmed its approach. The drugmaker said it is sticking to the plan to wind up the portfolio of brands.

Representatives for Unilever and Glaxo declined to comment.

growth prospects

People said Glaxo’s board is open to proposals, but the latest bid late last year was not within the range the company would consider. The pharma giant talked about the growth prospects for the entity formed through the combination of its consumer label with Pfizer Inc., which holds a minority stake.

The acquisition will be one of the largest globally in the past twelve months, and will come at a time when merger and acquisition activity is at an all-time high. It will also be Unilever’s biggest deal to date, furthering CEO Alan Jopp’s ambition to make big and bold acquisitions to reshape the company’s roster of labels.

Shortly after taking over in 2019, Jopp indicated that the company was ready to move on from the tamer takeover strategy of former CEO Paul Polman, who had focused on incremental deals in fast-growing areas such as male grooming and home care.

Jopp’s three-year tenure has been marred by distractions and misunderstandings that have plagued the company’s stock. Fundsmith founder Terry Smith, one of Unilever’s top 15 shareholders, said last week that the company “lost the plot” with its focus on burning its sustainability credentials at the expense of financial performance.

Last year’s decision by Ben & Jerry’s to stop selling ice cream to Israeli settlements in the occupied Palestinian Territories prompted several US states to sell their stake in Unilever. A planned sale of personal care brands including Q-Tips and Tigi Hair products was postponed into 2021 after it failed to generate interest. The company also had to settle for the sale of its tea operations to private-equity firm CVC Capital Partners after talks about the prospects of an initial public offering.

pandemic effect

Some of Unilever’s woes have been beyond Jope’s control. In his first year as CEO, he warned that economic setbacks in Latin America would cause sales growth to fall below expectations. In 2020, the COVID-19 pandemic created strong demand for the company’s soaps, but decreased revenue at its food-services division. Unilever now faces the risk of consumers discounting labels as it raises prices to counter inflation.

Shares are trading lower than in 2017, when Polman declined an unsolicited $143 billion offer from Kraft Heinz Co. However Jopp consolidated Unilever in the UK, eliminating a cumbersome Anglo-Dutch legal structure in an effort to facilitate more transformational deals. His first public foray into a high-profile takeover has so far fallen short.

Glaxo is also under pressure from shareholders, including activist fund Elliott Investment Management LP, which has urged the drugmaker to consider selling rather than spinoffs of consumer brands. The pharma company has outpaced rivals such as AstraZeneca plc in developing new treatments.

Glaxo has said it expects sales in the business to grow 4% to 6% over the medium term, faster than growth in Unilever’s personal care division. Jopp’s interest is now out in the open, with other bidders likely to emerge.

Guiseppe Bivona, co-founder of Bluebell Partners, an activist hedge fund with a stake in Glaxo, called Unilever’s bid “encouraging.” “It is a great asset and there should be widespread interest,” he said.

This story has been published without modification in text from a wire agency feed. Only the title has been changed.