Sonrisal’s owner rejects Unilever’s BRL 380 billion offer

GSK (GlaxoSmithKline) turned down a £50bn offer from Unilever to acquire its consumer health joint venture with Pfizer, on the grounds that it “fundamentally undervalued” the company and its future prospects.

The company has been preparing to separate the division, a joint venture with Pfizer which, in Brazil, owns, among other products, Sensodyne toothpaste, Eno fruit salt, Sonrisal, CataflamPro, Advil and center.

GSK said it turned down three approaches, including a £50bn one that included £41.7bn in cash and £8.3bn of Unilever shares, made on 30 December.

“GSK’s board unanimously concluded that the proposals were not in the best interest of GSK’s shareholders as they essentially undervalued the consumer health products business,” the company said in a statement.

“GSK’s board therefore remains focused on executing its proposed spin-off of the consumer health products business to create a new category-leading independent global consumer consumer company which, subject to shareholder approval, is expected to take place in the middle of the year. of 2022.”

Unilever said earlier on Saturday that it had “approached GSK and Pfizer about a potential acquisition of the business”.

“GSK Consumer Healthcare is a leader in the consumer healthcare market, and would be a strong strategic solution as Unilever continues to reshape its portfolio. There can be no certainty that a deal will be reached,” added Unilever.

Unilever has made several attempts to involve GSK in recent months, according to people familiar with the matter.

The £50bn proposal was first reported by the Sunday Times newspaper.

The prospect of a deal being achieved depends on what the market and GSK believe the value of the consumer company is. Analyst estimates range from £37bn to £48bn per unit (R$280bn and R$363bn). GSK said it expects sales to grow by 4% to 6% over the medium term, at constant exchange rates.

Unilever declined to comment on whether it will attempt a higher bid.

Activist investors such as US hedge fund Elliott Management have pressed Emma Walmsley, chief executive of GSK, to explore other options — including a sale — if it can generate greater returns for shareholders. Walmsley intends to use the spin-off proceeds to bolster the pharmaceutical and drug companies.

Marco Taricco, chief investment officer at Bluebell Capital Partners — one of the activist investors pushing GSK to consider selling the unit — said the proposal is “proof that such a high-quality deal has the potential to attract the interest of strategic and financial buyers”.

Pfizer owns 32% of the division, which GSK says will enter the London capital markets this year, although private equity groups have also scrutinized a potential acquisition.

A Unilever liquidation would be one of the biggest ever to take place in the London market, joining the third-largest company on the FTSE 100 with a division that, if independent, would be in the top 20. It would only be rivaled by Vodafone’s acquisition of Germany’s Mannesmann in 1999 and AB InBev’s purchase of SABMiller in 2016.

The approach came as Unilever, already one of the world’s largest consumer goods groups, seeks to renew momentum after a lukewarm period of sales growth.

Its share price has stagnated after Chief Executive Alan Jope took over in 2019 and top 10 investor Terry Smith this week attacked the company as “working under the weight of a management that is obsessed with publicly flaunting sustainability credentials at the expense of focusing on business fundamentals.”

_{Translated by Luiz Roberto Mendes Gonçalves}