GSK banks on stronger offer for its consumer healthcare business

theguardian.com:

With typical bravado, GlaxoSmithKline has, we learned on Saturday, dismissed three takeover bids from Unilever for its consumer healthcare venture with Pfizer, including one worth £50bn received just before Christmas.

The drugmaker, run by Dame Emma Walmsley, has decided to push on with plan A, namely the demerger and stock market flotation this summer of the consumer health business, known for brands such as Aquafresh and Sensodyne toothpaste, along with Panadol and Voltaren for pain relief.

GSK’s confidence that the bids from consumer goods company Unilever, which makes Dove soap and Sunsilk shampoo, “fundamentally undervalued” the venture and its future prospects is based on three pillars.

First, the drugmaker has released new forecasts showing it is now projecting annual sales growth of 4%-6% for the consumer venture, which made sales of £9.6bn last year – higher than the 3%-3.5% analysts have factored in, it says. It believes Unilever’s offer, which is made up of £41.7bn in cash and £8.3bn in Unilever shares, fails to capture this sales potential. It will explain the potential for the consumer brands more fully at an investor day on 28 February, with fourth-quarter results on 9 February also providing an opportunity to justify the strategy.

Second, GSK reckons the Unilever offer does not fully take into account the synergies the deal would create. And third, it argues that any takeover bid needs to come with a higher premium. Many analysts have estimated the value of consumer healthcare at £45bn, with some estimates as high as £48bn.

The New York hedge fund Elliott Management, the activist shareholder that has been pushing for a sale of the consumer health business and a change of leadership, declined to comment, but the