LONDON—Unilever UL 1.14%
PLC said it approached GlaxoSmithKline GSK 0.91%
PLC and Pfizer Inc.
over a possible acquisition of their consumer healthcare joint venture, a deal that would reshape the consumer products giant’s portfolio at a time when it is under pressure to accelerate growth.
Unilever said in a statement on Saturday that the company, known as GSK Consumer Healthcare, was “a leader in the attractive consumer healthcare space” and would be “a solid strategic fit”, while warning that it there was no certainty that an agreement would be reached.
Glaxo has laid out plans to turn the unit into a standalone company, which analysts say could be worth £45bn, or more than $61bn, while saying it would potentially be open for sale. The unit, 68% owned by Glaxo and 32% by Pfizer, sells everything from Aquafresh toothpaste to Advil painkillers.
Unilever approached Glaxo and Pfizer about a potential deal last year but were rebuffed, according to people familiar with the matter. The approach was reported earlier by the Sunday Times of London.
Unilever, best known for selling Ben & Jerry’s ice cream and Dove soap, already sells some health products like toothpaste and supplements, but a deal would give the company a presence in over-the-counter drugs.
The company has recently come under pressure to revive growth, with its share price falling over the past year and analysts saying it has underperformed rivals during the pandemic in areas such as hygiene. and packaged foods.
To boost its performance, Unilever sought to shed slow-growing brands and acquire companies in trendier categories. For example, in November it struck a roughly $5 billion deal to sell the bulk of its tea business to buyout firm CVC Capital Partners. During that time, he bought plant-based food brand Vegetarian Butcher, healthy snack maker Graze, and a string of high-end skincare and vitamin brands.
Still, Unilever’s efforts to revamp its portfolio have not been without challenges. The Wall Street Journal reported last year that it had to scrap plans to sell a series of struggling beauty and personal care brands after failing to generate enough interest.
For Glaxo, the expected fallout from its consumer healthcare business comes as the pharmaceutical giant seeks to focus more on drug and vaccine development.
Some investors, including activist hedge fund Elliott Management Corp., have urged Glaxo to consider an outright sale of the consumer business, rather than a spinoff, arguing that proceeds from any sale could be used to raise funding from R&D, to pay off debt and buy back equity.
Elliott built a multi-billion pound stake in Glaxo last year, according to people familiar with the matter, and made a series of recommendations in a letter to Glaxo’s chairman this summer. This included urging the company to consider selling the consumer unit.
Glaxo has not ruled out a sale if it deems such a transaction to be in the best interest of shareholders, although it currently plans to sell its majority stake in the business to existing investors and list the shares of the new company in London. . He recently appointed a CEO for the new standalone company.
Glaxo said the move would be tax-efficient. By retaining a stake, he would also have the opportunity to benefit from any gains in the stock price as he seeks to sell the remainder of the position over time. The consumer healthcare company would also take on a disproportionate share of the group’s debt, giving the other prescription drugs and vaccines businesses more freedom to invest.
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