Unilever has been put on the defensive after announcing an audacious £50bn bid to acquire GlaxoSmithKline’s consumer healthcare division.
Should it come to pass, the takeover would draw the likes of Aquafresh toothpaste and Panadol painkillers under Unilever’s ambit, but faces paying heavily for the privilege after previous bids were knocked back.
GSK and minority stakeholder Pfizer is playing hardball in the talks, holding out for a payday of as much as £60bn to pass on control of the brands.
The consumer goods giant contends that GSK is a “strong strategic fit” for its family of brands, which includes Dove soap, Hellmann’s mayonnaise and Domestos bleach, but investors have been less than impressed, sending shares south by as much as 6% before staging a recovery.
In a statement, Unilever, which plans to sell off low-growth brands and businesses, wrote: “The acquisition would create scale and a growth platform for the combined portfolio in the US, China and India, with further opportunities in other emerging markets.”
Alarmed by the mountain of debt Unilver would be saddled with after any takeover, analysts were near-unanimous in their criticism – not helped by a lack of faith in chief executive Alan Jope to helm the ship.
In scathing remarks, James Edwardes-Jones, an analyst at RBC Capital Markets, said: “We see little justification for such a deal strategically, operationally or financially. Even seriously contemplating such a bid raises questions in our mind about management’s confidence in the current business.”
Martin Deboo, an analyst at Jefferies, was similarly nonplussed, saying that “initial feedback on the deal from investors over the weekend has been almost uniformly negative,” reflecting low confidence in Unilever management and the potential of the deal to boost growth, together with concerns about debt levels.