Commentary by Adrià Calatayud

 

Unilever's unwillingness to increase its offer for GlaxoSmithKline's consumer-healthcare business beyond the around $68 billion that were rejected as too low might temper expectations at the pharmaceutical company over the valuation potential buyers would be ready to pay.

Glaxo last year set out plans for a demerger of the business in mid-2022, but activist hedge fund Elliott Management in July urged the company to explore a sale rather than a spinoff.

Glaxo, which has a 68% stake in the unit with the remaining 32% owned by Pfizer, said Unilever's proposals fundamentally undervalued the business and its future prospects.

Unilever's decision to effectively walk away from the deal came after facing strong pushback from its own investors when the approach became public, which suggests not all market players share Glaxo's views on how much the business is worth.

Procter & Gamble, which had been cited by analysts as a potential suitor for Glaxo's consumer-healthcare business along with Reckitt Benckiser and Nestlé, ruled itself out when CEO Jon Moeller said Wednesday that the company didn't need big acquisitions.

Analysts at Berenberg earlier this week said Unilever's bid valued Glaxo's consumer business at 19.8 times its forecast Ebitda for 2021, a 15% premium to the average in the household and personal-care goods industry. S

Shares in Glaxo closed 1.8% lower in London Thursday, erasing their gains earlier in the week on news of Unilever's approach.

 

Market Insights are commentary that is independent of the news coverage by reporters at The Wall Street Journal.

 

Write to Adrià Calatayud at adria.calatayud@dowjones.com

 

(END) Dow Jones Newswires

January 21, 2022 11:39 ET (16:39 GMT)

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