Unilever offer for GSK consumer arm is short by £5bn say analysts
Unilever’s rejected £50bn offer for Glaxo Smith Kline’s (GSK) consumer business falls short according to market analysts.
Marmite maker Unilever has had three unsolicited offers rebuffed by GSK including a bid made last month which comprised of £41.7bn in cash and £8.3bn in company shares.
Analysts have questioned the financial reasoning behind Unilever’s bid with experts at broker Jefferies estimating that Unilever may have to pay £55bn for the division, a multiple of 18.5 times the companies forecast earnings before tax the Times first reported.
Martin Deboo at Jefferies said Unilever would be forced to tap investors to raise the additional £14bn in cash needed to secure the sale or borrow and sell assets.
“We would expect disclosure of Unilever’s approach to encourage other over-the-counter participants like P&G and Reckitt to reach for their slide rules, as well as perhaps Nestle,” Mr Deboo said in comments to the Telegraph. “Any auction would be a test of Unilever’s resolve and already-stretching deal economics.”
In an update issued today, GSK said that the £50bn bid undervalued its consumer goods business which is due to be spun off from the wider company later this year. The company said: “the Board of GSK unanimously concluded that the proposals were not in the best interests of GSK shareholders as they fundamentally undervalued the Consumer Healthcare business and its future prospects.”
Unilever today defended its offer for GSK’s consumer business which is co-owned by drugs giant Pfizer and makes Panadol painkillers and Aquafresh toothpaste.
“GSK Consumer Healthcare would be a strong strategic fit,” the company announced in a trading update today.
“We believe that this would be an attractive and synergistic combination for the shareholders of Unilever, which would also deliver value and certainty for the shareholders of GSK and Pfizer,” the statement continued, noting that 45 per cent of GSK Consumer Healthcare is in Oral Care and Virtual Memory Systems – categories in which Unilever already has a presence.
Read more: Unilever makes £50bn bid for GSK’s consumer business