Unilever Faces Headaches Over Potential GSK Deal
If Unilever succeeds in buying the outfit that owns Advil and Excedrin, it may need to avail itself of those pain relievers. The company must be getting headaches from investor gripes about the potential deal. It has tried to respond, but not very well.
Over the weekend, news broke that consumer-products giant Unilever made three offers for GSK Consumer Healthcare, a joint venture between GlaxoSmithKline and Pfizer. The last tender rang in at $68 billion. The leak forced London-based Unilever to issue a brief note of confirmation. GSK also released a statement saying it rejected the proposals as too low.
On Monday, Unilever put out a much lengthier statement trying to explain why it so desperately covets the deal. The Hellmann’s mayo maker sees consumer health as a growth area for it as it relaxes its food focus. “We believe that this would be an attractive and synergistic combination for the shareholders of Unilever,” it wrote. Unfortunately, the press release contained a lot of that kind of corporatese.
CEO Alan Jope also held a call with reporters. “We are looking for competitive, responsible growth and don’t conflate this activity with a defensive mindset,” he said.
The company was expected to sweeten its offer (maybe with some of its Ben & Jerry’s ice cream?), but on Wednesday it said it wouldn’t. Case closed? We’ll see.
The problem is that, while many financial analysts agree it should fixate on growth, they also think over-the-counter drugs won’t cut the (Colman’s) mustard (another of its brands). And Unilever isn’t exactly an OTC-drug expert.
“Initial feedback on the deal from investors over the weekend has been almost uniformly negative,” Jefferies analyst Martin Deboo was quoted in The Wall Street Journal.
We are looking for competitive, responsible growth and don’t conflate this activity with a defensive mindset.
— Unilever CEO Alan Jope
Cynics believe the proposed acquisition is a way for Unilever to distract from its lackluster performance. Its stock is down about 15 percent the past year and has been in the doldrums for five.
The brickbats over the deal resemble those tossed by investors who complain that the company obsesses too much over ESG (environmental, social and governance) issues and that it does so to cover up its shortcomings. Many observers accuse it of being too focused on being a goody two shoes rather than minding the top and bottom lines.
Obviously, ESG is a big topic these days, one that presents challenges for many companies. How well Unilever navigates that is up for debate.
For example, the company uses the word “purpose” a lot. Terry Smith of Fundsmith LLP, a major Unilever investor, wrote in a recent shareholder letter: “A company which feels it has to define the purpose of Hellmann’s mayonnaise has in our view clearly lost the plot.”
If all this gives Unilever agita, a successful deal would bring yet another relief elixir: GSK owns Tums antacids.
Photo Credit: PRCG
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