Glaxo courts Qatar and Singapore to head off £50bn Unilever swoop

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GlaxoSmithKline is courting the sovereign wealth funds of Qatar and Singapore as cornerstone investors in a listing of its £50bn consumer business as it seeks to head off a risky takeover by Unilever.

Glaxo courts Qatar and Singapore to head off £50bn Unilever swoop
© Provided by The Telegraph Emma Walmsley

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The FTSE 100 pharmaceuticals titan will formally open discussions with state-owned funds after GSK’s capital markets day next month in a bid to shore up support ahead of a float slated for mid-2022.

Securing the backing of a sovereign wealth fund will allow GSK to offer an exit to investors who do not wish to hold stock in the new company. The Qatar Investment Authority and Singapore’s GIC are among those that will be targeted, it is understood.

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It comes as GSK, whose chief executive is Dame Emma Walmsley, seeks to head off a potential takeover bid by Unilever. It was forced to defend offering £50bn to buy Glaxo’s healthcare division late last year in a proposal that was rebuffed.

Alan Jope, chief executive of Unilever, said he was prepared to sell food brands to fund the acquisition, with sources at the company saying the likes of Marmite, Hellmann’s mayonnaise and Ben & Jerry’s were all on the block.

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GSK’s plan to secure cornerstone investment marks a fresh twist in the battle for some of its best-known brands and could break a stand-off between the company’s board, led by chairman Sir Jonathan Symonds, and the Wall Street activist Elliott Investment Management.

It is understood that many GSK shareholders are supportive of the plan to float the consumer arm but do not want to hold stock in the new company because they are focused on its pharmaceutical prowess. A sovereign wealth fund would be able to act as a buyer for these investors’ shares.

A takeover by Unilever is less appealing for the GSK board as the company would likely face significant competition hurdles and drag out the timetable for investors to cash out. 

Bloomberg reported that investment bankers are preparing a debt package of up to £25bn in case private equity companies decide to make their own offer.

More than £7bn was wiped off the value of Unilever, with shares falling 4pc after the weekend’s revelations spooked the market. Glaxo shares ended 4.1pc higher.

The company said it is accelerating efforts to offload “intrinsically lower growth brands and businesses” on Monday, as part of efforts to keep debt down while it goes on a spending spree in the health, hygiene and beauty categories.

Mr Jope said that it would be looking at brands in Unilever’s food and refreshments business despite a good third quarter performance from the likes of mayonnaise brand Hellmann’s and ice cream line Ben & Jerry’s.

He said: “We have an excellent food and refreshment business with global leading positions … but it is true that food and refreshments’ long term growth profile has been below other parts of the portfolio.”

Unilever has not ruled out the sale of any of its food and drink brands. It is understood to be weighing up sales of its most popular lines – including Marmite, which has been made at a factory in Burton on Trent since 1902 – given the scale of its takeover targets in health, hygiene and beauty.

Jefferies estimates that the entire food division could be sold for about £47bn, almost exactly what Unilever has offered for GlaxoSmithKline’s consumer health arm.

Martin Deboo, an analyst at the investment bank, said: “The announcement that Unilever is committed wholeheartedly to a future based on health, hygiene and beauty implies strongly that their foods business is non-core. If that is the case I would favour a wholesale disposal, or float], rather than a piecemeal one. But the emotional wrench for Unilever would be saying goodbye to their ice cream business.”

Alongside Ben & Jerry’s, Unilever also owns the Cornetto, Wall’s and Magnum brands. The company said it had no immediate plans to separate food and refreshments out from the rest of its business, but that all options were on the table as Unilever seeks to focus on high-profit ranges.

It follows a series of sales in this category by Unilever, including the offloading of its margarine and spreads business in 2017 for £6bn and a further £6bn deal to sell its tea business last November.

Unilever investors were sceptical about a takeover of GSK’s consumer arm. One of the 15 largest shareholders told the Financial Times that management would have to prove the offer was not a “sign of desperation” and added: “I need a lot of convincing about how and why they think they can justify it, finance it and use it to deliver value for shareholders.”

A spokesman for GSK declined to comment on talks with sovereign wealth funds.

Earlier on Monday the company said Unilever’s approaches “fundamentally undervalued” the consumer business. The company said it was “focused on executing its proposed demerger of the consumer healthcare business” by mid-2022.

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