Unilever is not giving up on GSK’s consumer business

Shares of Unilever plc (LON: ULVR) slid 4.0% on Monday after the British multinational said it was still interested in buying GlaxoSmithKline plc’s (LON: GSK) consumer business.

GSK continues to reject Unilever’s proposals

So far, GSK has rejected three of Unilever’s proposals, including the most recent one that was valued at $68.25 billion. While shareholders aren’t sure if Unilever should spend so much on the acquisition, the London-based company is convinced GSK’s consumer segment is a “strong strategic fit”.

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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.

If Unilever fails to strike a deal, GlaxoSmithKline will list its consumer business on the stock exchange as it had originally planned.

As a separate, publicly-traded company, this unit could be valued at roughly $100 billion, which is why Bluebell Capital Partners’ Marco Taricco also sees Unilever’s bid as “underwhelming”.  

Will Unilever bump up its bid?

The U.S. pharmaceutical giant, Pfizer Inc, has a 32% ownership stake in GSK’s consumer unit. The two companies are likely to open negotiations with Unilever if it bumps up its bid. A source familiar with the matter said:

Right now, there is more value in a spin-off. But if Unilever is ready to go north of $82 billion, then a dialogue could start.

If Unilever indeed makes such an offer, it will be one of the largest deals on a global scale since the advent of the Coronavirus pandemic. But Quilter Cheviot’s Chris Beckett thinks it’s unlikely to happen.

Given vocal investor concern of late and Unilever’s share price reaction this morning, this could prevent a higher offer from materializing.