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Unilever is promising to revamp its structure and plans to sell off slow-growth brands as it weighs making a higher offer for GlaxoSmithKline’s consumer unit.
Unilever said on Monday it will announce the restructuring later this month. The disclosure comes after Glaxo said over the weekend that it rejected three offers from the consumer-products company for a bundle of brands including Advil painkiller and Sensodyne toothpaste, the latest of which was worth £50bn ($68bn).
Shares of Unilever fell as much as 4.1% in London. Glaxo rose as much as 4.9%.
Alan Jope is making his biggest strategic shifts at Unilever since becoming CEO three years ago. The Dove soap owner said it will refocus around its health, beauty and hygiene operations, suggesting divestitures may involve its food operations, which include the Ben & Jerry’s and Magnum ice cream brands.
Unilever has held talks with banks about additional financing for a potential sweetened offer for the Glaxo unit, according to people familiar with the matter.
Some financial firms have discussed lending enough for a higher bid. Unilever hasn’t made a final decision on using the firepower, said the people, who requested anonymity as they aren’t allowed to speak publicly.
Glaxo has been planning to spin off its consumer brands, but shareholders including Elliott Investment Management have been pushing CEO Emma Walmsley to consider a sale instead. The drugmaker said over the weekend it’s sticking with plans to spin off the portfolio.
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 , which retains a minority stake.
A takeover would be one of the largest globally in the past 12 months, and would come at a time when merger and acquisition activity is at an all-time high. It would also be Unilever’s biggest-ever deal, advancing Jope’s ambition to execute bigger and bolder acquisitions to reshape the company’s roster of labels.
Shortly after taking the helm in 2019, Jope signalled 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.
Bloomberg. More stories like this are available on bloomberg.com
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.