China Food

Unilever is on the eve of a sudden change

Unilever, which relies on food and beverage with an annual income of 100 billion yuan, is vigorously promoting the transformation. Like some peers, while subtracting traditional food and beverage, the giant also hopes to promote growth by betting on great health. Its latest attempt is to “smash” almost a year’s turnover for acquisition.


Snack generation noticed tonight that Unilever responded again to the proposed huge acquisition of GlaxoSmithKline consumer health products department, and indicated that its board of directors had carried out an extensive process to evaluate the strategic path, so as to reposition Unilever’s product portfolio into a higher growth category. At the same time, the company also “spoilers” will adjust the organizational structure to improve performance.

The “Introduction” that led to this sound is a huge acquisition plan. Recently, GlaxoSmithKline announced that it had received three “unsolicited, conditional and non binding” proposals from Unilever to acquire its consumer health products department. The latest bid was 50 billion pounds (about 433.985 billion yuan). On the same day, Unilever also confirmed that it had approached the potential acquisition, but it was uncertain whether any agreement would be reached.


Interestingly, GlaxoSmithKline said in its statement that it had rejected all the proposals because Unilever underestimated the value and Prospect of the business. However, Unilever did not seem to give up and was accused of further action.


Now, let’s pay attention to it.


Latest sound


Despite GlaxoSmithKline’s refusal, the potential deal may not have officially come to an end.


In today’s statement, Unilever said it believed that the transaction would be an attractive and synergistic combination for the shareholders of the company, and would also bring value and certainty to the shareholders of GlaxoSmithKline and Pfizer.

“Health consumer goods is a highly complementary category for Unilever, with good synergy potential and multiple ways to expand its scale.” The company explained that 45% of GlaxoSmithKline’s consumer health products business comes from oral care and VMS (vitamins, minerals and supplements), in which Unilever has a place and strong ability.


In addition to once again showing its interest in GlaxoSmithKline consumer health products, Unilever today also released a series of strategic directions and measures to accelerate the improvement of operational performance.


In the strategic direction, the company said it would reposition its product portfolio into a higher growth category and substantially expand its business in the fields of health, beauty and hygiene in the future. Xiaoshidai noted that Unilever today described GlaxoSmithKline consumer health products as its “strong strategic fit”, and VMS products, as one of the latter’s business pillars, are also the field of continuous overweight by peers such as Nestle.

The company added that the Board believes that major acquisitions should be accompanied by accelerated divestiture of essentially low growth brands and businesses, which had previously divested the spread and tea business. “This will provide funding and enable the impact of business divestiture to be offset by acquisition synergies.”.

In terms of accelerating the improvement of operating performance, Unilever said that in addition to solving the problem of long-term strategic direction, it has always focused on accelerating the growth of existing business, and has implemented a series of measures to improve operating performance, including paying more attention to excellent operation to improve market competitiveness, etc.

“Although the pandemic has brought challenges to our market, in 2021, we began to see the results of operational initiatives in the growth momentum.” Unilever said its growth rate in the first three quarters of last year was the fastest in eight years.


In addition to the actions already taken, Unilever also “spoilers”, which will announce a major measure to improve its performance later this month. “After a comprehensive review of our organizational structure, we intend to move from the existing matrix to an operating model that can improve agility, category focus and accountability.”.


High price target


Even if it has not “backed down” after being publicly rejected, what is the “magic” of GlaxoSmithKline’s consumer health products business for Unilever?


It is found that GlaxoSmithKline consumer health products were jointly established by GlaxoSmithKline and Pfizer in 2019. Among them, GlaxoSmithKline owns 68% of multi CNC shares, and Pfizer holds 32%.


After the merger, the company’s business covers the fields of nutritional supplements, oral health, painkillers and so on, and has made many brands well known to Chinese consumers a “family”, including costar, Votalin and Billiton of GlaxoSmithKline, as well as Advil, Shancun and Caltech of Pfizer.

According to GlaxoSmithKline in 2019, the above joint venture is “the global leader in OTC (Note: OTC) products, and ranks first or second in market share in all key regions (including the United States and China)”.


Today, Unilever also said that the acquisition will create scale and growth platform for product portfolio merger in the United States, China and India, and provide more opportunities in other emerging markets.


If it were not Unilever, which “killed on the way”, this business might have attracted attention again because of its successful listing. According to the GlaxoSmithKline plan, it was supposed to promote the separate listing of consumer health products this year.

According to GlaxoSmithKline’s recent statement, it has received three proposals from Unilever. The most recent proposal was to bid £ 50 billion on December 20, 2021, including £ 41.7 billion (about rmb361.943 billion) in cash and £ 8.3 billion (about rmb72.042 billion) worth of Unilever shares.


However, GlaxoSmithKline has rejected the Unilever proposal on the grounds of underestimation. “GSK’s board of directors agreed that these proposals are not in the best interests of the company’s shareholders because they fundamentally underestimate the consumer health business and its future prospects.” The company said.


GlaxoSmithKline revealed that its consumer health products business had unaudited sales of 9.6 billion pounds (about 83.259 billion yuan) in 2021. From 2019 to 2021, the organic sales of the business still achieved an average annual compound growth of 4% under the adverse impact of the epidemic. It is expected that the annual organic sales will maintain a growth rate of 4 ~ 6% in the medium term.


“The expectation of strong sales growth in the medium term will be mainly driven by the continuous growth of major brands such as oral care, VMS (vitamins, minerals and supplements) and painkillers, accelerating innovation in the United States and China and further growth in emerging markets.” GlaxoSmithKline described that the consumer healthcare industry with a scale of 150 billion pounds has strong fundamentals, and its business can continue to lead in the next few years.


In addition, as the listing flag entered the countdown stage, GlaxoSmithKline’s statement also stressed that the board of directors will focus on the implementation of business spin off. The matter is subject to shareholder approval and is expected to be completed in mid-2022.


Foreign news review


Xiaoshidai noted that in recent days, foreign power has also paid a lot of attention to this potential huge acquisition.


Today, the Financial Times quoted people familiar with the situation as saying that despite being rejected, Unilever still hopes to reach an agreement on the acquisition. It is reported that GlaxoSmithKline and Pfizer insist on raising their offer to at least 60 billion pounds. However, for this huge amount, some analysts are worried about Unilever’s debt.


“We believe that such a transaction has no (reasonable) strategic, operational or financial reasons. Even if the bid is carefully considered, we will question the management’s confidence in the current business.” The newspaper quoted RBC Capital Markets analysts as saying. Unilever said today that after any acquisition, the company’s goal is to return to the current debt level in the short and medium term.


The financial times pointed out that the exposure of the bidding prompted Unilever to announce in advance its plan to comprehensively reform its huge product portfolio. Since the beginning of 2019, Alan jope, the chief executive who has been leading the group, has been under pressure to improve performance and share price.

Alan jope, CEO of Unilever

According to public information, Unilever, which has not “given up”, may consider a new round of quotation.


After the bidding process was made public, Bloomberg recently quoted people familiar with the situation as saying that Unilever had negotiated with the bank to provide additional financing for this potential acquisition invitation. The news also said that Unilever may eventually sell some non core assets in GlaxoSmithKline’s relevant product portfolio to buyers such as private equity companies to help with acquisition financing.


Another Bloomberg analysis pointed out that the acquisition of GlaxoSmithKline consumer health products is of strategic significance to Unilever, and the real challenge is to pay a successful price.


“For Unilever, this acquisition will mark a shift to a rapidly growing healthcare category. Its core skills are marketing and global distribution, so it should be able to sell branded over-the-counter drugs better than a science led pharmaceutical company. For example, developing some Glaxo brands in emerging markets is an obvious opportunity.” The Bloomberg analysis said.


This analysis also believes that GlaxoSmithKline also has the motivation to continue to accept the offer. The real attraction of “Unilever acquisition” is that it allows GlaxoSmithKline to substantially withdraw (joint venture), rather than a series of piecemeal stock sales at unpredictable prices, which may involve discount every time “.


“Joan Lu must weigh the loss of missing the deal and letting competitors get it. His proposal for GlaxoSmithKline can be regarded as an agreement that his current strategy is not fast enough. Paying a little more cost may be better than permanently missing opportunities.” Bloomberg analysis wrote.

Qiao’an Road

The Wall Street Journal recently said: “if the (GlaxoSmithKline consumer health products) department goes public as planned, its valuation may be 45 billion pounds. (Unilever) this valuation is slightly higher than analysts’ previous forecasts.”


Sales review


If there is a reversal later, Unilever will really win the whole business of GlaxoSmithKline consumer health products at a higher price, which will make it buy big health products from GlaxoSmithKline again, and is expected to become the largest M & A in terms of business scale and transaction amount in the past decade.


As a reference, Unilever’s business volume in 2020 is about 45.288 billion pounds, and the next round of quotation will undoubtedly exceed 50 billion pounds before it can get the “ticket” again.


Today, xiaoshidai checked Unilever’s global official website and found that among the mergers and acquisitions with open prices since 2012, Unilever’s most “generous” was the acquisition of GlaxoSmithKline’s health food and beverage product portfolio (GSK HFD) in India, Bangladesh and 20 other major Asian markets with a total turnover of about 550 million euros in 2018.


The company said the deal was in line with its established strategy to increase its influence in health food categories and high growth emerging markets.


This large acquisition can also be said to be the epitome of Unilever’s transformation. In order to get rid of weak growth, the FMCG giant is trying to reshape its product portfolio with greater efforts, and sold many so-called low growth businesses, which are basically concentrated in the food and beverage sector.


In addition to the tea business that is promoting delivery, Unilever’s sales also include the sale of Chilean ice cream business in 2020, alsa baking and dessert business in 2019, and the sale of margarine and spread business to KKR in 2018.

At the same time, Unilever continues to “buy” in potential areas such as health food. In the enterprise strategy searched by snack generation today, Unilever delineated functional nutrition and plant-based food as high growth categories.


Statistics show that since 2018, Unilever has successively acquired the vegetarian butcher, a plant meat brand, oly nutrition, a VMS enterprise, the holding company of graze, a British healthy snack brand, liquid IV, a US health science nutrition and health care company, smartypants vitamins, a US based VMS enterprise, and onnit, which has a series of nutritional supplements.


However, compared with GlaxoSmithKline’s consumer health products business, these acquisitions of Unilever can be said to be “minor”. Next, what kind of game will the two giants play for trading? Snack generation will continue to pay attention to it.

Pay attention to “snack generation” (wechat: foodinc) “and reply to” Unilever “to see the wonderful news.

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