Companies & Products

GSK Rejects Unilever’s £50 Billion for Healthcare Unit

GSK is getting numerous offers from strategic and financial purchasers as it prepares to spin off its consumer health care unit later this year, a division jointly held with Pfizer that makes Panadol painkillers, Theraflu cold and flu treatment, and Otrivin decongestant.

The Consumer Health Care Unit was formed as a Joint Venture (JV) to create a world-leading consumer healthcare business where GSK held the majority controlling equity interest of 68% in the JV and the remaining 32% equity interest was owned by Pfizer.

Recently, the company turned down a £50 billion deal (£41.7 billion and £8.3 billion in shares) fromUnilever to buy its consumer health care unit, claiming that it “fundamentally undervalued” the health care business and its prospects. GSK now plans to demerge the Consumer Healthcare unit from its other businesses later this year by listing on both the London Stock Exchange (LSE) and the New York Stock Exchange (NYSE), thus creating a new world-leading consumer health company. Meanwhile, Unilever has made several serious attempts to engage GSK about acquiring the consumer health care unit in the past, but none of these efforts appears to have succeeded. According to the “Financial Times,” the prospect of a deal being reached between both parties depends on what the market and analyst think the consumer health care division is worth, although analysts estimate a range between £38 – £48 billion.

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Unilever, which has been suffering from low sales growth and fallen share prices, seeks to reignite investors’ interest in its business through the successful acquisition of the GSK consumer unit. A successful deal between Unilever and GlaxoSmithKline would be one of the largest ever on the London market, bringing together two large companies with a division that, if independent, would be in the top 20 in the UK. However, investors remained concerned about Unilever’s underperformanceand want the company to work on a turn around but it appears that the acquisition of other firms is a method Unilever plans to utilise to improve its prospects. In the past, Unilever has acquired several small consumer health brands in India and other Asian markets.

Why is GSK spinning its Consumer Healthcare Unit?

On June 23rd, 2021, GlaxoSmithKline Plc announced its plans to spin off its consumer healthcare unit from its other business segmentsPharmaceuticals and Vaccines which focus on offerings relating to human genetics, immune system and advanced technology. 

The decision to spin off the consumer healthcare unit started in April 2021 after an activist investment firm Elliott Management Corp. with a history of aggressive acquisitions in the healthcare sectoracquired a large stake in GSK and began to put pressure on the Chief Executive Officer (CEO) to accelerate the company’s turnaround efforts. As a result of this effort,  the shareholders of GSK approved the plan to sell the consumer healthcare business to allow the company to focus on its Pharmaceuticals and Vaccines businesses.

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Meanwhile, GlaxoSmithKline’s stock surged on Monday, after the company said it had rejectedUnilever’s offer for its consumer goods division over the weekend. However, some analysts believe that Unilever may make a fourth proposal, raising the bid-offer to £55 billion to close the acquisition, as Procter & Gamble and other private equity firms are also interested in acquiring GSK’s healthcare consumer division.

Lately, everyone appears to be interested in the business of health, as profits in the sector continue to soar following the new coronavirus pandemic.

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