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 GSK confirmed over the weekend that it had rejected the Dove soap
maker's bid for the business, which is home to brands such as
Sensodyne toothpaste, Emergen-C vitamin supplement and Panadol
painkiller.
GSK, led by boss Emma Walmsley, has hired Goldman Sachs and
Citigroup to review Unilever's approach but it will not engage in
talks unless Unilever bumps up its offer, sources familiar with the
matter said.
GSK's shares jumped 5% in early trading to their highest level since
May 2020. GSK said on Saturday Unilever's proposal "fundamentally
undervalued" the business, adding that it would stick to its plan of
listing the division this year.
"Initial feedback on the deal from investors over the weekend has
been almost uniformly negative," Jefferies analysts said in a note.
Unilever, however, defended the bid for the GSK consumer business,
in which U.S. drugs company Pfizer owns a 32% stake.
"The acquisition would create scale and a growth platform for the
combined portfolio in the U.S., China and India, with further
opportunities in other emerging markets," Unilever said, pointing to
synergies in the oral care and vitamin supplements business.
GSK and Pfizer would open negotiations with Unilever's boss Alan
Jope if the consumer goods giant was ready to improve its bid to
more than 60 billion pounds, a source familiar with Pfizer's
strategy said.
The source called the business a "legitimate standalone candidate",
adding its market value could rise to almost $100 billion once the
business was spun out and listed.
"Right now there is more value in a spin-off but if Unilever is
ready to go north of 60 billion pounds then a dialogue could start,"
he said.
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 Pfizer did not immediately
respond to requests for comment on the fate of
GSK's consumer arm.
EXECUTION
A Unilever buyout would be one of the largest
ever on the London market and one of biggest
deals globally since the start of the pandemic.
It would boost Unilever's growth strategy as
management has been under pressure to turn
around the company's languishing stock price and
cope with high costs and slim margins.
"It's a little surprising that they (GSK) haven't
ripped Unilever's arm off at £50bn, as it's a decent price, with the
only question being as to whether it's the right one," CMC Markets
analyst Michael Hewson said in a note.
"It might be for GlaxoSmithKline and Pfizer, however there is a
feeling that for Unilever it could well prove to be too high a
price," Hewson added.
Barclays analysts said the deal would be "very complex to execute in
normal times, let alone in the middle of a global pandemic".
Unilever, which is set to announce an initiative later this month to
strengthen its business, said on Monday it was committed to "strict
financial discipline" for any acquisitions, adding that such deals
would be accompanied by the divestment of lower margin businesses or
brands.
GSK has been pursuing a separate listing of the consumer arm
following pressure from investors to explore a shake-up of the
company and focus on its pharmaceuticals business.
($1 = 0.7312 pounds)
(Reporting by Pushkala Aripaka and Siddharth Cavale in Bengaluru,
Keith Weir and Pamela Barbaglia in London and Ludwig Burger in
Frankfurt; Editing by Shounak Dasgupta, Emelia Sithole-Matarise and
Jane Merriman)
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