Unilever – the home of PG Tips, Dove and Magnum ice cream – has said that it “will not increase” its £50bn bid for GlaxoSmithKline’s (GSK) consumer healthcare business, after its bid was rejected.
The battle over the proposed acquisition looked set to continue after GSK rejected the bid and submitted evidence to show that its healthcare arm – which owns brands such as Sensodyne toothpaste, Panadol and Centrum vitamins – was worth significantly more.
Unilever said that it had considered evidence from GSK, but had not changed its view on the value of the business. It had previously stated that it is looking to claim a bigger stake in the health and hygiene sectors and this deal would be a “strong strategic fit”.
But in a statement on Wednesday, the company said it would “not increase our offer above £50bn”.
“We note the recently shared financial assumptions from the current owners of GSK Consumer Healthcare and have determined that it does not change our view on fundamental value,” it added.
Unilever said it was committed to “maintaining strict financial discipline” to ensure that “acquisitions create value for our shareholders”.
This is the third Unilever offer that GSK has rejected, saying the proposals “fundamentally failed” to reflect the value of its healthcare operation, which is part of a joint venture with US drug maker Pfizer.
Read more: Unilever agrees £3.8bn sale of PG Tips & Lipton
“The sharp uptick in inflation means consumer goods giants with recognisable brands are in a strong position if consumers start to pare back spending,” commented Hargreaves Lansdown equity analyst, Laura Hoy.
“That’s likely part of the reason for Glaxo’s forecast organic sales growth of between 4% and 6% when the consumer business goes it alone. Add to that proposed cost savings plans and the premium to be paid for the cost synergies that come along with a merge, and Glaxo thinks its healthcare business is worth a lot more than the £50bn Unilever was prepared to offer.”
Unilever is currently worth around £100bn and is the third largest company on London’s FTSE 100 index. A deal would see it take over one of the biggest divisions of the FTSE 100’s fifth biggest company.
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