Fundamentally undervalued the consumer healthcare business

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Assignment:

In December 2021, GlaxoSmithKline (GSK) received an unsolicited offer from Unilever to acquire GSK's consumer healthcare business for a total deal value of GBP £50 billion. GSK's Consumer Healthcare business, which generated revenues of £9.6 billion in 2021, was a joint venture with Pfizer, of which GSK held a controlling interest of 68% and Pfizer 32%. It included popular brands such as Advil, Robitussin, Sensodyne, Centrum and Emergen-C.

GSK board rejected Unilever's offer on the basis that it fundamentally undervalued the Consumer Healthcare business and its future prospects.

In July 2022, GSK ended up spinning off 54.5% of the Consumer Healthcare business to its shareholders under the name Haleon. Pfizer retained its 32% ownership, and GSK retained the remaining 13.5% stake. Haleon's day-one equity valuation on the London Stock Exchange was £28.5bn. Added to the £10.5bn of debt that Haleon assumed in the spinoff, the new company's implied enterprise value was £39bn.

What arguments, if any, could GSK's board and management team use to justify their decision to its shareholders (and Pfizer's)?

Reference no: EM133334206

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