Unilever has approached GlaxoSmithKline about a potential acquisition of its consumer healthcare joint venture with Pfizer for up to £50 billion in what could become one of the biggest deals in the London market.
The consumer goods group said on Saturday that it had “approached GSK and Pfizer regarding a possible acquisition of the business”. The formal offer was unsolicited. GSK declined to comment.
“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. There can be no certainty that a deal will be reached,” Unilever added.
The Sunday Times, which first reported on the offer, said soap and ice cream maker Magnum offered around £50bn for the division late last year but was pushed back.
Analysts valued the business at around £47-48bn, suggesting the offer did not include a bonus or significant savings from synergies between the two consumer companies.
Unilever declined to say whether it would return with a higher offer.
GSK is preparing to spin off the division, a joint venture with Pfizer that makes Panadol painkillers, Theraflu cold and flu medicine and Otrivin decongestant. The new division would be led by insider Brian McNamara and its board is expected to be chaired by Dave Lewis, the former chief executive of Tesco.
Activist investors, including US hedge fund Elliott Management, have pressured GSK chief executive Emma Walmsley to explore other options, including a sale, if it can deliver better returns for shareholders. . Walmsley plans to use the proceeds from the split to bolster the lackluster drug and pharmaceutical industry pipeline.
Pfizer owns 32% of the division, which GSK said it would bring to London this year, although private equity groups have also considered a potential purchase.
A takeover of Unilever would be one of the largest ever on the London market, bringing together the FTSE’s third largest company with a division which, if independent, would be in its top 20. It would have no equal such as Vodafone’s acquisition of Germany’s Mannesmann in 1999 and the purchase of SABMiller by AB InBev in 2016.
The approach comes as Unilever, already one of the world’s largest consumer goods groups, seeks to regain momentum after a period of tepid sales growth.
Its share price has languished since 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 management obsessed with the public display of references in terms of sustainable development to the detriment of focusing on the fundamentals of the company”.
Other investors have disputed this, but most agree the company needs to address its underperformance. It agreed last year to sell its growth-stifling tea division for 4.5 billion euros to private equity group CVC, but has yet to complete a major acquisition under Jope.
Unilever struck a deal in 2018 to buy GSK’s health drinks business, including the Horlicks brand, in India and other Asian markets for 3.3 billion euros. It also acquired a series of smaller consumer health brands, including Smarty Pants, Olly and Onnit supplements and Liquid IV drink mixes.