Written by Brenda Nakalema

Unilever stock rises after $68 billion bid for Glaxo’s business is abandoned

Unilever shares rose after the company announced on Thursday that it wouldn’t increase its bid worth $50 million for GlaxoSmithKline’s …

Unilever shares rose after the company announced on Thursday that it wouldn’t increase its bid worth $50 million for GlaxoSmithKline’s healthcare division, especially after heavy criticism from investors and analysts alike.

GlaxoSmithKline (ticker: GSK) initially rejected three offers from Unilever (ticker: UL) for the business, which contains brands such as Sensodyne toothpaste, Panadol painkillers and Nexium antacids, citing the fact that it felt the offers “fundamentally undervalued” the business worth and its future prospects.

The British drugmaker, Glaxo, said it would stick to its plan to list the consumer healthcare business separately, in which Pfizer (ticker: PFE) has a 32% stake in mid- 2022. It released new forecasts for the division to support its decision.

Unilever said in a statement that it took note of these financial assumptions but decided that it would not cahnce their fundamental value. Accordingly, the company decided not to increase its over above 50 million pounds.

In the midst of all this, Glaxo, which was already experiencing heavy pressure from investors to re-energize its share price, was dealt a huge blow on Wednesday after it announced that its chief scientific officer, Hal Barron, was leaving the company to pursue his own ambitions.

Following the announcement by Unilever, Unilever’s American depositary receipts rose 9%, while Glaxo’s ADRs fell 2.4% from 3.61% earlier in the year. London listed shares of Unilever rose 1.4%, while Glaxo’s were down 1.88%.

At the start of the week, Unilever hinted that it would continue in its pursuit of the Glaxo unit, adding that it was “a strong and strategic fit” for the company. However, the bid was not well received by investors and analysts who questioned the logic behind the deal, causing the stock to drop by 7% on the day the deal was announced.

In the eye of the storm stands the Unilever Chief Executive Alan Jope, who’s feeling the pressure as he tries to conceptualize a new strategy for shareholders to boost the share price.

Analysts at RBC commented in a research note on how the entire ordeal had been a “painful experience” for Unilever and its shareholders.

“We expect the shares to rally on the back of this news, but in our opinion, the Unilever investment case has taken a severe dent. The fact that Unilever is walking away from GSK consumer health is unequivocally positive, in our opinion. Still, our concern over what happens next has increased compared to this time last Friday,” the analysts added.