Big questions for Unilever board after GSK pursuit ends
It was fun while it lasted. Unilever says it won’t bump up its £50bn offer for GlaxoSmithKline’s consumer products division, so one has to assume that’s the end of the saga. GSK’s board, after all, can’t credibly have second thoughts about entering a negotiation: it had rejected £50bn as a “fundamental undervaluation”.
Yet two big questions remain for Unilever’s board. First, why wasn’t the refusal to improve the offer made on Monday this week? On that day, remember, the chief executive, Alan Jope, emphasised exactly the same commitment to “strict financial discipline” but also declined to rule out a higher bid.
The natural explanation is that Unilever’s shareholders lobbied furiously to get the expedition called off. The share price fell 10% in two days, which was a clear sign of little confidence in the plan. At £50bn, investors might have been persuadable, but not at a higher price.
In the circumstances, the board had little choice but to retreat. Even so, delivering a minor heart attack to the share price, however temporarily, is not a good look.
The out-of-the-blue factor points to the second question: what’s plan B? There has to be one because Jope also said on Monday that there were alternative options to pursue the new goal of being bigger in healthcare.
That could mean anything from taking aim at another mega-sized target, such as Johnson & Johnson’s consumer division or Reckitt, or a series of smaller deals. Either way, uncertainty hangs in the air.
The shame is that the GSK business looked a good fit. And there’s nothing wrong with the ambition to expand in healthcare while slimming the food side.
But after three days of excitement, Unilever has succeeded only in showing how difficult it could be to execute its
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