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Unilever faces investor backlash over GSK bid

Fundsmith challenges Unilever's management on its thinking behind the failed bid for joint venture
Unilever faces investor backlash over GSK bid
  • Unilever not upping £50bn bid
  • Fundsmith argues that Unilever needs to focus on its existing business

Unilever (ULVR) has been castigated by a major investor over its attempted £50bn acquisition of GlaxoSmithKline (GSK) and Pfizer’s (US:PFE) joint-venture consumer healthcare business, with fund management shareholder Fundsmith labelling it a “near-death experience” for its investment in the consumer goods company.

Fundsmith’s chief executive Terry Smith and head of research Julian Robins wrote a “post mortem” letter to its investors after Unilever announced to the market that it would not increase its £50bn bid for the joint venture, which GSK rejected on the basis that it “fundamentally undervalued the business”.

Smith and Robins said that Unilever’s management should focus on improving the operating performance of the business as it stands instead of pursuing challenging acquisitions in sectors “where they have very little expertise”.

Unilever has been Fundsmith’s worst-performing fast-moving consumer goods stock, the pair said, questioning its management’s approach and reasoning behind the three bids it had made for the joint venture.

“The irony is that food and refreshment, the business they planned to sell if they were to buy GSK Consumer, outperformed the rest of the business, the one they materially wanted to expand, two-to-one”, the pair said.

In its latest market update on the attempted purchase, Unilever said that financial assumptions from GSK and Pfizer cited in defence of their rejection of its £50bn offer “does not change our view on fundamental value” of the business.

The failed bid means that GSK, which owns 68 per cent of the joint venture, and Pfizer will continue plans to demerge the business. This is expected to happen by mid-2022.

Unilever’s shares are down by around 7 per cent since news of the acquisition approach emerged.