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01/18/2022

Unilever’s rejected offer for GSK consumer healthcare reportedly raises questions

The bid for GSK’s assets, including Sensodyne toothpaste and Advil painkillers, comes as Unilever is dealing with steep inflation and sluggish growth in emerging markets.
Sandra Levy
Senior Editor
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A Reuters report regarding the rejection of Unilever's $68 billion offer for GlaxoSmithKline’s consumer healthcare assets is raising questions, including whether Unilever should raise the bid and risk overpaying or seek another route to expand in healthcare?

The bid for GSK’s assets, including Sensodyne toothpaste and Advil painkillers, comes as Unilever is dealing with steep inflation and sluggish growth in emerging markets, where it derives 60% of its revenues, the report said.

[Read more: GSK names McNamara to lead forthcoming independent consumer healthcare company]

CEO Alan Jope also is facing shareholder pressure over a languishing stock price, which fell as much as 8% on Monday after its bid became public, according to Reuters.

Analysts said digesting GSK’s consumer health assets at a price of over 50 billion pounds in cash and stock, would nearly triple Unilever’s leverage toward 5.6 times in the first year from 2 times net debt to EBITDA currently.

“The leverage implied by such a deal would make it less likely they turn around their core business,” Bernstein analyst Bruno Monteyne said, pointing to Unilever’s added balance sheet pressure and limited ability to invest behind brands.

[Read more: DSN webinar highlights Kroger, Unilever sustainability practices]

According to the report, Unilever on Jan. 17 also announced plans to focus more on health, beauty and hygiene products after an extensive review of its businesses. "This points to a potential spin off or disposal of its foods business, according to at least three brokerages. However, letting go of a cash-generative business could be detrimental at this time, they said, and it would be difficult for Unilever to sell the entire business to a single buyer, the report stated.

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