The GSK unit – a 68:32 joint venture with US drugs giant Pfizer – is one of the world’s largest consumer health players, with 2021 sales of £9.6 billion and products ranging from painkillers to toothpaste. According to UK newspaper Financial Times (FT), citing a source “close to Pfizer,” GSK twice, but unsuccessfully, pushed Unilever to improve its offer, which was a premium of only 10%. Market watchers said that 25% would have been worth more serious consideration.

Unilever’s withdrawal leaves the drugmaker standing by its original plan to spin off the consumer unit by mid-2022, and analysts said any potential buyer “would need to make a seriously compelling offer” to knock the demerger plan off course.

Activist hedge fund has Unilever in its sights

As if the immediate future were not looking murky enough for Unilever, the FT reported on the weekend that Trian Partners, the activist hedge fund that drove DuPont CEO Ellen Kullmann out of the company and stirred the waters elsewhere, has built an undisclosed stake in Unilever and plans to put pressure on its newest target.

In 2018, Trian set its sights on another consumer goods giant, Procter & Gamble, and after what was then said to be the biggest proxy fight ever involving a US company, was forced to add Trian’s proprietor, Nelson Peltz, to the board. Peltz stepped down from the P&G board in 2021 after the company had met some of its demands and announced new financial targets.

Unilever’s strategy is said to have caught the investor’s attention after it made the grab for the GSK unit, and its share price subsequently plunged by 10% on the back of  shareholder complaints that the margins of the company’s OTC products were not attractive enough.

For some time, GSK, too, has been in the crosshairs of an activist hedge fund, Elliott Management. The fund has urged the company to separate its pharmaceuticals and vaccines activities after the spinoff, called for the appointment of new board directors (its own candidates) with “deep pharmaceutical and consumer health expertise” and suggested that CEO Emma Walmsley move over to the spun-off consumer company.

Author: Dede Williams, Freelance Journalist