Last checked at 
* GSK says received three proposals from Unilever, but
undervalued
GSK to continue with spinoff of the consumer health business
Unilever confirms interest, citing "strong strategic fit"
Unilever, GSK under pressure from shareholders over stock price
(Adds GSK statement, details on Unilever strategy, Factbox)
By Siddharth Cavale, Ludwig Burger and Mrinmay Dey
Jan 15 (Reuters) - GlaxoSmithKline on Saturday said
it had rejected a 50-billion-pound offer from Unilever
for its consumer goods arm, saying it "fundamentally
undervalued" the business and its future prospects and that it
would stick to its plan of spinning off the unit.
Unilever confirmed the approach earlier on Saturday, saying
the Glaxo unit would be a "strong strategic fit" as it continues
to re-shape its portfolio spanning food, beauty and home care
brands.
A deal of this size would be the biggest globally since the
start of the pandemic, if it goes through. It could also
transform Unilever into a formidable beauty and personal care
purveyor, taking on the likes of Estee Lauder and L'Oreal, while
for GSK, it could bring much needed relief from investor
pressure that has been building over the past year.
GSK said it had received three bids from Unilever, the
latest on Dec. 20 comprising 41.7 billion pounds in cash and 8.3
billion pounds in Unilever shares, which failed to reflect the
intrinsic value of the business and its potential.
"The Board of GSK therefore remains focused on executing its
proposed demerger of the Consumer Healthcare business ... on
track to be achieved in mid-2022," the statement said, adding
that it was confident the business would beat global market
growth rates in the medium term.
The group's consumer goods business is due to be spun out
into a separate listing in the middle of this year.
Earlier, Britain's Sunday Times said the Unilever bid for
the business made late last year was worth roughly 50 billion
pounds, and had been rejected as too low by GSK and Pfizer
, which owns a minority stake in the division.
The approach by Unilever, which owns brands such as Dove
soap and Marmite, for Glaxo's portfolio of household brands
including Panadol painkillers and Sensodyne toothpaste was
understood to have been unsolicited, the report added.
The bid did not include any takeover premium or recognition
of synergies, the newspaper said, adding that it was not clear
whether the group would make a higher offer.
Dave Lewis, who is due to head GSK's consumer health unit,
declined to comment on the approach. The former boss of UK
grocer Tesco said the matter was for GSK's board.
Unilever declined to comment on whether it would return with
a higher bid. "There can be no certainty that any agreement will
be reached." Brokerage Jefferies last year put a valuation for
the whole consumer unit at 45 billion pounds.
If a deal goes through, GSK's consumer health unit's brands
would likely be incorporated into Unilever's Beauty and Personal
Care business, its biggest by sales.
Performance in the unit, which sells Dove, Lifebuoy, Axe and
Vaseline, has been tepid during the pandemic as fewer people
venture out or attend social occasions, while higher costs of
plastics and petrochemicals have also dented margins.
In its most recent quarter, Beauty and Personal care volumes
fell 1.3% while prices rose 3.9%.
INVESTOR PRESSURE
Unilever's Chief Executive Alan Jope is under pressure to
turn around its languishing stock price as it struggles to
compete in the face of high inflationary costs, especially in
emerging markets, its biggest source of revenue.
The FTSE-listed conglomerate's stock has fallen 10% over the
past year compared with P&G's 18% rise and Reckitt's 1.4%
decline, despite a pandemic-driven boost in shopping for
groceries and household goods that has benefited all three
companies.
British fund manager Terry Smith, whose Fundsmith vehicle is
a top-10 Unilever investor, this week criticized the group for
promoting sustainability credentials at the expense of
performance.
Since taking over from Paul Polman as CEO in 2019, Jope has
laid out a vision for Unilever called "brands with purpose", a
socially conscious strategy that would see the company focus
investments and marketing on brands that "communicate a strong
environmental or social purpose" even at the cost of profit.
"A company which feels it has to define the purpose of
Hellmannās mayonnaise has in our view clearly lost the plot. The
Hellmannās brand has existed since 1913 so we would guess that
by now consumers have figured out its purpose (spoiler alert ā
salads and sandwiches)," Smith said.
Smith was not immediately available to comment.
Jope, however, has kept to his promise of streamlining the
company. The company sold a majority of its Tea business,
including Pukka Tea and PGTips to CVC Capital partners for $5
billion late last year and has been looking to offload a
portfolio of slow growing beauty brands.
Investor activism has also reared its head at GSK.
In April last year, U.S. activist hedge fund Elliott
Management revealed a multi-billion pound stake in GSK, putting
pressure on CEO Emma Walmsley to explore a shake-up of the
company after it fell behind in the COVID-19 vaccine race.
Fledgling activist investor Bluebell Capital Partners, fresh
off its success in ousting the CEO of Danone last year, also
took a stake in GSK in September, making demands including
asking Walmsley to re-apply for her job, citing a lack of
scientific expertise.
BIG DEAL FOR JOPE
For Unilever, the deal would be the biggest move for Jope
since becoming CEO in 2019.
He has previously shot down suggestions that Unilever was in
the market for big deals, saying instead that the company would
focus on smaller acquisitions in fast-growing areas such as
luxury beauty, plant-based foods and health and wellness.
If a deal with GSK does go through, it will be Unilever's
second with the company after it bought its health food drinks
business, including Horlicks, in India and other Asian markets
for 3.3 billion euros in 2018.
The consumer remedies industry, which has traditionally been
attached to the prescription drug sector, is also in a phase of
major transformation as several pharma companies no longer see a
benefit in a combination.
Johnson & Johnson in November unveiled plans to spin
off its consumer health division, owner of the Listerine and
Baby Powder brands, to focus on pharmaceuticals and medical
devices. Sanofi has said its consumer unit would become
āstandaloneā business.
($1 = 0.7314 pounds)
(Additional reporting by William Schomberg; Editing by Mark
Heinrich, Jan Harvey and David Evans)
