(Alliance News) - Unilever PLC shares turned lower in London on Thursday afternoon, having started the day in the green on investor relief that it won't raise its offer for GlaxoSmithKline PLC's consumer arm.
GlaxoSmithKline was the second worse faller in the FTSE 100 index, down 2.1% to 1,631.39 pence. After the market close on Wednesday, Unilever had said it will not lift its GBP50 billion bid for GSK Consumer Healthcare.
Unilever said it has seen a set of financial assumptions on the business, outlined by current owners GSK, and said the numbers do not "change our view on fundamental value". Unilever said it is "committed to maintaining strict financial discipline" and ensuring any acquisitions can create value for shareholders.
Unilever shares initially rose as much as 2.4% on the news when the London Stock Exchange reopened Thursday morning, as investors had been worried the consumer good company would overpay for the GSK business. But by afternoon, Unilever was down 0.7% to 3,649.00 pence. The stock is down 7.1% from its closing price on Friday last week.
Unilever promised to keep looking for ways to enhance shareholder value.
"Unilever...reiterates its commitment to continuing to improve the performance of its existing portfolio through its ongoing focus on operational excellence, its upcoming reorganisation and by rotating the portfolio to higher growth categories," it said Wednesday.
But not everyone was convinced. Fund manager Terry Smith, who last week said Unilever had "lost the plot", on Thursday accused the company's management of resorting to "meaningless platitudes".
Smith runs the Fundsmith Equity Fund, which he said is the 13th largest shareholder in Unilever and the 7th largest counting only active fund management shareholders. He said Fundsmith first invested in Unilever in 2010, and the return has been "poor".
Noting that the attempt to buy GSK Consumer Healthcare is "thankfully dead", Smith said Unilever now should focus on improving the performance of its existing businesses.
"The Unilever management seems to be playing what Warren Buffett lampoons as 'gin rummy' management - like a player in the eponymous card game, throwing away their least promising card(s) each round in the hope they will turn over better ones," Smith wrote in an open "post mortem" on the GSK consumer bid.
"They should maybe consider whether the problem may not be with the hand/business but with the player/management."
Unilever didn't immediately respond to a request for comment on the Fundsmith note.
By Tom Waite; thomaslwaite@alliancenews.com
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