The M&A Market Remains Hot in the New Year... Unilever Considers Raising Offer Price for GSK Consumer Goods Acquisition Proposal

[Photo by Reuters Yonhap News]

[Asia Economy Reporter Park Byung-hee] The mergers and acquisitions (M&A) market, which set a record high in transactions last year, is showing signs of heating up again in the early new year with proposals for large-scale M&As.

British consumer goods company Unilever is expected to raise its acquisition offer for the consumer goods division of British pharmaceutical company GlaxoSmithKline (GSK) to over ?50 billion (approximately 81.4905 trillion KRW), Bloomberg reported on the 16th (local time). According to sources, Unilever is currently discussing with financial institutions the possibility of increasing the acquisition offer. Some banks are reportedly willing to provide funding to Unilever even if the offer exceeds ?50 billion, which GSK has rejected.

Unilever had made three acquisition proposals to GSK prior, with the last offer at the end of last year totaling ?50 billion, consisting of ?41.7 billion in cash and ?8.3 billion in Unilever shares. Unilever is reportedly considering reducing cost burdens by selling non-core assets to private equity firms after acquiring GSK’s consumer goods division.

GSK rejected Unilever’s ?50 billion acquisition offer, stating that the value of its consumer goods division would increase through integration with Pfizer’s consumer business. GSK also claimed that the consumer goods division’s sales would grow by 4-6% in the medium term, which is higher than the sales growth rate of Unilever’s personal care business.

Unilever’s current acquisition proposal is expected to be one of the largest deals among the transactions in the M&A market that heated up over the past year. It is also the largest M&A proposal in Unilever’s history.

Unilever CEO Alan Jope, who took office in 2019, emphasized actively pursuing M&A to increase corporate value. However, there have been no significant achievements in the three years since his appointment, and Unilever’s current stock price is lower than in 2017 when it rejected Kraft Heinz’s $143 billion acquisition offer.

GSK is also under pressure from activist funds such as Elliott Investment Management to spin off its consumer goods division. Facing competition in its core pharmaceutical business from companies like AstraZeneca, GSK is under pressure to sell its consumer goods division.