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* Unilever closes down 0.7%, GSK shares slip 2%
* Analysts largely positive on Unilever decision
* Questions over CEO Alan Jope's strategy remain
(Adds details from new Terry Smith letter; updates shares)
By Pushkala Aripaka
Jan 20 (Reuters) - Unilever's strategy was under the
investor microscope on Thursday after the consumer goods group
effectively abandoned its 50 billion pound ($68 billion) pursuit
of GlaxoSmithKline's consumer healthcare business.
Shares in the maker of brands such as Dove soap and
Hellmann's mayonnaise ended down 0.7% after Unilever said on
Wednesday that it would not raise a rejected offer.
It said its view on the value of the healthcare business had
not changed despite GSK lifting financial forecasts for
the unit, which is 32% owned by Pfizer and makes
products such as Sensodyne toothpaste and Panadol painkillers.
Some analysts said Unilever's management, under
pressure after a 31% drop in its share price since highs seen in
late 2019, had been wise not to be drawn into upping their bid
for a business that GSK has said it wants to spin off.
Barclays analysts called it a "smart move," saying that the
decision "shows that whilst Unilever remains very keen on the
asset, it is disciplined and will not do the deal at any price."
Others said the proposed mega-deal, which would have been
one of the largest ever on the London market, had been
unexpected and raised questions about Unilever's plan under
Chief Executive Alan Jope for a more gradual shift away from
lower-margin goods to health, beauty and hygiene products.
"From our discussions with shareholders and Unilever share
price action, we believe there is a clear discontent with
management and the board over the changed strategy and focus on
transformative M&A," J.P. Morgan analysts said in a note.
Meanwhile, a group of investors said they had filed a fresh
resolution urging Unilever to address a "crucial blind spot" and
set ambitious targets to sell healthier foods.
Last week, Terry Smith, whose Fundsmith vehicle is
Unilever's 13th biggest investor, lambasted the company for
being "obsessed" with promoting its sustainability credentials
at the expense of performance.
Smith took aim at Unilever again on Thursday, labelling the
bid "a near death experience," and reiterating calls to focus on
the operating performance of the existing business "before
taking on any more challenges".
'CALLED THEIR BLUFF'
GSK, led by Chief Executive Emma Walmsley, has stuck to its
plans to spin off the consumer healthcare unit despite previous
pressure from activist investors to consider alternatives.
It had rejected three approaches from Unilever, and the
final proposal made on Dec. 20 comprised 41.7 billion pounds in
cash and 8.3 billion pounds in Unilever shares.
GSK's stock closed down 2% on Thursday.
"Unilever cannot increase any offer, not because the value
of GSK's consumer (unit) would not warrant it, but simply
because Unilever's investors expressed a no-confidence vote on
Unilever's CEO doing any deal of this size," a GSK investor, who
declined to be named, told Reuters.
Barclays analysts asked if GSK had overplayed its hand.
"By saying (GSK) sees £50 billion as fundamentally
undervaluing the business, it now makes it very difficult to
accept the £50 billion on the table whilst still saving face,"
they said.
"Some investors think that Glaxo may have overplayed their
hand and Unilever has called their bluff."
Other large targets could be available for Unilever, with
the consumer remedies industry, traditionally a part of the
prescription drug sector, undergoing major transformation.
Johnson & Johnson in November unveiled plans to spin
off its consumer health division, owner of Listerine and Baby
Powder brands, to focus on pharmaceuticals and medical devices.
($1 = 0.7328 pounds)
(Reporting by Pushkala Aripaka and Siddharth Cavale in
Bengaluru and Simon Jessop in London; Editing by Keith Weir,
Shounak Dasgupta, Pravin Char and Alexander Smith)
