‘Marmite situation’ for GSK investors as Unilever bids spark potential bidding war
Analysts have predicted a bidding war may erupt for GlaxoSmithKline’s (GSK) consumer arm after it emerged that the pharmaceutical giant batted away three bids from Unilever last year.
Shares in the two firms headed in opposite directions this morning after GSK confirmed over the weekend that Unilever had made three cash-and-share approaches for its consumer portfolio of brands.
Shares in Unilever fell nearly 8 per cent this morning while GSK was the top riser on the FTSE 250 index with shares jumping as much as 5 per cent.
Russ Mould, investment director at AJ Bell, said: “GlaxoSmithKline’s share price has jumped on the news as Unilever’s actions effectively fire the starting gun for a bid war for the consumer goods unit. Nestle could be interested, so too private equity.
“Unilever looks to be bidding for the unit because it needs to inject some excitement into its business, having recently disappointed with sales and profit margins.”
Mould said the bid posed a “Marmite situation” for GlaxoSmithKline’s shareholders.
He added: “They’re either hoping for a quick return now through a sale or better returns in the future through the planned demerger.”
Laura Hoy, an equity analyst at Hargreaves Lansdown, said that Unilever’s bids had “shone a light” on GSK’s consumer business to other potential suitors.
She told City A.M.: “Everything that has happened with Unilever has shone a light on GSK’s consumer arm as a viable asset to a lot of the big names to consumer healthcare going forward.
“The Unilever bid was not well received by the market because Unilever on the surface doesn’t look the best home, but it would be remiss of me to suggest that some of the other big names are not now looking at this.”
Hoy added that the market’s negative reaction to the bids were because it seemed a “shot in the dark”.
“The biggest thing to watch now will be how Unilever update on their strategy and whether they are planning to submit another bid,” she said.
Some GSK shareholders hit out at the plans over the weekend. Richard Buxton at Jupiter Capital Management, a top-30 shareholder in GSK, said: “The idea of letting the goons at Unilever run it is laughable.”
Unilever boss Alan Jope responded to the claims today, saying he “would not indulge in name calling”.
Unilever defended the approach today and announced plans to grow its health, beauty and hygiene business and sell slower-growing products, as it looked to slowdown an investor exodus.
The firm confirmed the approaches to GSK over the weekend. A spokesperson told City A.M. : “GSK Consumer Healthcare is a leader in the attractive consumer health space and would be a strong strategic fit as Unilever continues to re-shape its portfolio.”