Unilever to Sharpen Health Focus After GSK Consumer Interest

Open to Talk

Glaxo’s board is open to proposals but the latest bid late last year was not within a range the company would consider, the people said. The pharma giant talked up growth prospects for the unit, formed through a combination of its consumer labels with those of Pfizer Inc., which retains a minority stake.

Unilever has made preparations that could make a divestment of its food business easier. A little over a year ago the company streamlined itself into a single U.K.-based entity, ditching its longtime dual nationality. One reason for abandoning the cumbersome structure was to ease prospects for transformative merger-and-acquisition deals.

At the time, Jope assured the Dutch government that any potential carveout of the company’s Foods and Refreshments division would take place in the Netherlands. That business brings in 19 billion euros of annual revenue. Beauty and Personal Care, which Jope ran before being elevated to CEO, generates about 21 billion euros, and Home Care has annual sales of 10.5 billion euros.

Unilever could either sell the entire food unit, which makes Knorr stock cubes, Marmite yeast spread, Colman’s and Maille mustards, Hellmann’s mayonnaise and other products such as plant-based protein alternatives. Or it could divest its ice-cream business, the world’s largest, which includes brands such as Ben & Jerry’s, Magnum, Solero, as well as high-end gelato labels Grom and Talenti. It generates revenue of about 7 billion euros annually.

A deal for Glaxo’s consumer unit would be one of the largest globally in the past twelve months and would come at a time when merger and acquisition activity is at an all-time high.

Less Tame

Shortly after taking the helm in 2019, Jope signaled that the company was ready to progress past the tamer takeover strategy of former CEO Paul Polman, who had focused on incremental deals in fast-growing sectors such as male grooming and home care.

Jope’s three-year tenure has been mired in distractions and misfires that have held back the company’s stock. Fundsmith founder Terry Smith, one of Unilever’s top 15 shareholders, last week said the company had “lost the plot” with a focus on burnishing its sustainability credentials at the expense of financial performance.

Glaxo has said it expects sales at the business to increase by 4% to 6% in the medium term, which is faster than the growth rate at Unilever’s personal care division. With Jope’s interest now out in the open, other bidders could emerge.

Giuseppe Bivona, co-founder of Bluebell Partners, an activist hedge fund with a stake in Glaxo, called Unilever’s bid “encouraging.” “It’s a great asset and there should be broad interest in it,” he said.

Deutsche Bank AG and Centerview Partners LLC are advising Unilever, according to the people familiar with the situation. Glaxo is working with Goldman Sachs Group Inc. and Citigroup Inc. on the listing and activist defence, Bloomberg News reported in June.

Unilever shares are trading at a lower level than in 2017 when Polman rejected an unsolicited $143 billion offer from Kraft Heinz Co.

SOURCE: Bloomberg

IMAGE SOURCE: CBS