Unilever has defended its plan to acquire the consumer health division of GlaxoSmithKline following scepticism from analysts about its £50bn bid.
The maker of Dove soap, Hellmann’s mayonnaise and Domestos bleach, today said GSK Consumer Healthcare was a “strong strategic fit”, and the proposed purchase was in line with Unilever’s plans to increase its presence in health, beauty and hygiene.
“The acquisition would create scale and a growth platform for the combined portfolio in the US, China, and India, with further opportunities in other emerging markets,” it said, adding that it would sell off “intrinsically lower growth brands and businesses”.
Unilever’s approaches for GSK Consumer Healthcare, which makes Aquafresh toothpaste and Panadol painkillers, have so far been rebuffed, but it hopes to continue talks, according to people familiar with the situation.
The update came as analysts expressed scepticism about the potential acquisition and the debt with which it would saddle Unilever.
“We see little justification for such a deal strategically, operationally or financially,” said James Edwardes-Jones, analyst at RBC Capital Markets. “Even seriously contemplating such a bid raises questions in our mind about management’s confidence in the current business.”
Bruno Monteyne, analyst at Bernstein, said the deal would entail “£10bn of shareholder value destruction”.
Martin Deboo, analyst at Jefferies, said that “initial feedback on the deal from investors over the weekend has been almost uniformly negative”, reflecting low confidence in Unilever management and the potential of the deal to boost growth, together with concerns about debt levels.
Unilever said that after any acquisition “the company would target a return to current levels of gearing over the short to medium term”.
The group said it would set out a “major initiative to enhance our performance” later this month, including changes to its structure. Unilever has recently faced discontent from investors, including an attack from top-10 shareholder Terry Smith.